ACC 302 Final Project: Orientation And Overview

Acc 302 Final Projectproject Orientation And Overviewevery Year At The

Review the following chapters: · Chapter 18: The Changing Business Environment: A Manager’s Perspective · Chapter 19: Cost Concepts and Cost Allocation · Chapter 23: Cost Behavior Analysis · Complete the Mission Statement Template Handout to record information about your pretzel company, its mission, and its featured product. · Use the tables and information in Exhibit 1 on the next page to calculate the costs of running your business and to complete the short answer section of the Mission Statement Template Handout . · Calculate total variable costs per dozen pretzels. · Calculate sales price per dozen pretzels using 120% markup on variable costs. · Calculate contribution margin per dozen pretzels. · Calculate breakeven point for the quarter (three months) in dollars and units. · Submit the completed Mission Statement Template Handout to “My Assignments” in My West.

Paper For Above instruction

The initial phase of establishing a pretzel business involves developing a comprehensive mission statement and a partial business plan. This process enables entrepreneurs to clarify their business objectives, understand the costs involved, and strategize for successful operations. As the foundation of the business plan, the mission statement articulates the purpose of the pretzel enterprise, emphasizing the quality of products, customer satisfaction, and business goals. Completing the mission statement requires analyzing various cost components, including direct materials, direct labor, manufacturing overhead, and operating expenses, as outlined in Exhibit 1.

Calculating the costs of the business is crucial for determining pricing strategies and ensuring profitability. The costs start with the direct materials used in pretzel production, such as flour, sugar, yeast, butter, eggs, salt, and specialty ingredients. For each of these, the per-unit costs provide the basis for calculating the total variable costs per dozen pretzels. The calculation involves multiplying the unit cost by the quantity used per batch, then scaling this to a per dozen basis. For example, if flour costs $0.15 per cup and the recipe uses a specific number of cups per dozen pretzels, the total flour cost per dozen is derived accordingly.

The next step involves establishing the selling price by adding a markup—specifically, 120% of the variable costs—ensuring the business covers its costs and achieves profit margins. The contribution margin per dozen pretzels is then determined by subtracting total variable costs from the sales price, offering insight into the contribution toward covering fixed costs and generating profit. Furthermore, calculating the breakeven point, both in units and dollars, indicates how many dozens of pretzels need to be sold to cover all costs, serving as a critical target for sales projections and planning.

These calculations and strategic considerations form part of the overarching business plan, which guides the entrepreneur through the financial planning and operational setup necessary to expand from a local fairstand to a brick-and-mortar store. Accurate forecasting and understanding of costs are vital not only for effective pricing but also for attracting potential investors or lenders, such as the bank likely to review the business proposal for a loan.

The importance of beginning the master budget process with an accurate sales budget cannot be overstated. The sales budget serves as the foundation for all subsequent budgets, including production, direct materials, manufacturing overhead, and operating expenses. An accurate sales forecast ensures that production levels align with market demand, minimizes excess inventory, and optimizes resource allocation. Factors such as market trends, competitor analysis, seasonal fluctuations, and historical sales data are critical considerations in developing a reliable sales budget. Each factor influences the projected revenue, shaping business strategies, and operational planning.

Operational expenses and disbursements for operating expenses, though related, are distinct concepts. Operating expenses encompass the ongoing costs required to maintain daily business activities, including salaries, utilities, and depreciation. Disbursements for operating expenses, on the other hand, refer to the actual cash payments made during a specific period. Understanding this distinction is essential for cash flow management, as expenses may be accrued at the end of a period but paid in subsequent months, affecting liquidity and financial planning.

The primary difference between variable and absorption income statements lies in how fixed manufacturing overhead costs are treated. A variable income statement reports only variable production costs, assigning fixed overhead as period expenses. This approach emphasizes contribution margins and is useful for managerial decision-making. Conversely, the absorption income statement allocates fixed manufacturing overhead to all units produced, including inventory valuation, aligning with generally accepted accounting principles (GAAP). Both statements provide valuable insights but serve different management and reporting purposes.

Budgeting offers various advantages for a growing pretzel business. It facilitates strategic planning, projecting revenues and expenses to assess financial viability. Budgeting helps in setting performance targets, controlling costs, and identifying potential financial shortfalls early. It also enhances communication within the organization and provides benchmarks against which actual performance can be measured. Effective budgeting supports decision-making, minimizes financial risks, and underpins the pursuit of business expansion goals, such as obtaining financing from banks or investors.

In addition to the detailed financials, the comprehensive business plan encompasses operational strategies, marketing approaches, and risk management plans. This holistic document demonstrates to potential lenders that the business is prepared to handle challenges and capitalize on opportunities. The cover letter crafted for the banker should succinctly convey the business’s value proposition, its growth potential, and the borrower’s ability to repay the loan, supported by the financial data and budgets developed in the planning process. Overall, meticulous planning and accurate budgeting are essential for securing financing and ensuring the successful launch and expansion of the pretzel business.

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