ACC 202 Investor Report
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Apr 3, 2024
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Furry Friends Pet Supplies
1
Investor Report for Furry Friends Pet Supplies
Justin Updegrove
Southern New Hampshire University
Report for Furry Friends Pet Supplies
Introduction Pets provide companionship and unconditional love like no other to their owners, so I decided to start a business to show my love and appreciation for pets. At Furry Friends Pet Supplies, we manufacture high-quality, sustainable collars, leashes, and harnesses for your fur babies to live in comfort and style. I have decided to start with the manufacturing of collars, leashes, and harnesses because these are necessities for any dog or cat owner. I plan to add to our
portfolio of products as we master the production of these initial products and continuously increase our sales and profit margins. I will take the first year of business to really focus on production costs and become extremely efficient to maximize profits while also delivering high-
quality products for the consumers. In year 2 of operations, I plan to introduce more products to create a more diverse portfolio. By year 5 of business, I hope to have a larger manufacturing facility to keep up with the high demand for our products. Throughout years 5-10 of business is when I will focus on opening up one or two retail locations along with really blitzing the e-
commerce sector of our business.
Purpose
The purpose of this report is to provide you with information related to our first month of operations. I will discuss the costing strategies we used, the costs incurred for the business in our
first month of production, revenues, and profits. I strongly believe this information will be very useful in projecting future production costs, revenue, and profits. I have high hopes that as the business progresses moving forward, we will be able to cut down on costs and increase sales, ultimately leading to better profitability. We were profitable in our first month of operations, which is an astonishing achievement for our business. I believe after sharing this information with you, you will feel as passionate about our company as I do.
Report for Furry Friends Pet Supplies
Methods and Approach
Managerial accounting supports management and the management process. “The management process is made up of five basic phases which include: planning, directing, controlling, improving, and decision-making (Warren & Tayler, 2020).” I used all of these phases in generating the information for this report. I started with research and planning to come up with estimated operational costs for production. This included variable costs such as nylon webbing, nylon ribbons, buckles, and price tags to make the leashes, harnesses, and collars. I also compiled estimated fixed costs for production including things like employee salaries, rent for my workshop space, utilities on the building, depreciation on machines, my loan payment, and my salary to myself.
I conducted market research to come up with optimal price points for collars, leashes, and
harnesses in the Northeast region. I was able to gather three different price point options for each
product and an estimate of the quantity of each product I would sell based on the different price points. From this information, I was able to set price points and make goals of what I wanted to sell to hit a break-even point or certain target profit. I did this by conducting a break-even analysis by calculating contribution margins for each product. Upon completion of our first month of business, I compared actual results to the expected results for things such as material costs, labor costs and quantities, and sales. The information I am sharing in this report and everything myself and my business do is in strict adherence with the AICPA code of conduct. The AICPA professional code of conduct is a behavioral guideline made up of six principles for CPAs and really anyone conducting business. I calculated variances for collar sales upon completion of our first month of business, and the variances were unfortunately all unfavorable. However, I will not emit this information
Report for Furry Friends Pet Supplies
from my report as I want to be as transparent and honest with you as possible. I am a new business that has just completed its first month of operations, and I am going to improve and make decisions to further enhance productivity, efficiency, and profitability.
Financial Strategy
Costing System
I chose to use the job order costing system for my business. “Job order cost systems are often used by companies that manufacture custom products for customers or batches of similar products (Warren & Tayler, 2020).” This method made the most sense for us as we are making different products that are all a little different from one another versus using a process costing system or activity-based costing system. A process costing system is most beneficial for companies that manufacture large quantities of indistinguishable products, such as an oil refinery. The product costs are assigned per manufacturing department, not per product. Activity-based costing uses different cost drivers or activity bases to allocate overhead. This method is just too time-consuming and expensive for a business that is as small as mine and just getting started.
Selling Prices
Collars: $28
Leashes: $30
Harnesses: $35
I chose these price points for my products because they yielded the highest contribution margin of the three different price point options for each product. I conducted a cost volume profit analysis, also known as a break-even analysis, based on the contribution margins. The break-even quantity is determined by taking the fixed costs associated with each product and
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