Question
You plan to open a small business for manufacturing pet collars, leashes, and harnesses. You have found a workshop space you can use for sewing your products. After some research and planning, you have estimates for the various operating costs for your business.
The total square footage for the sewing rooms is 1,500 square feet, which is broken into three areas that are 500 square feet each. You have taken out a loan for start-up costs. The $550 monthly payment goes into effect immediately and should be accounted for in your costs. You will also collect a modest salary for the first year of $500 per month; remember to divide evenly among the services.
Salary and Hiring Data
• One collar maker, who will be paid $16 per hour and work 40 hours per week
• One leash maker, who will be paid $16 per hour and work 40 hours per week
• One harness maker, who will be paid $17 per hour and work 40 hours per week
• One receptionist, who will be paid $15 per hour and work 30 hours per week
Other Costs
• Rent: $750 per month; allocate based on square footage
• High-tensile strength nylon webbing—$12 per yard of webbing
o 3 collars per yard of webbing
o 2 leashes per yard of webbing
o 2 harnesses per yard of webbing
• Polyester and nylon ribbons—$9 per yard of ribbon
o 3 collars per yard of ribbon
o 2 leashes per yard of ribbon
o 2 harnesses per yard of ribbon
• Buckles made of cast hardware—50¢ per buckle
o 4 buckles used per collar
o 3 buckles used per leash
o 8 buckles used per harness
• 3 industrial sewing machines at $3,300 each for a total of $9,900; depreciation is $165 per month (five-year life, zero salvage value)
• Utilities and insurance: $600 per month; allocate based on square footage
• Scissors, thread, cording: $1,200
• Price tags: $250 for 2,500 tags (10¢ each)
• Office supplies: $2,400 or $200 per month
• Other business equipment: $2,000
• Loan payment: $550 per month
• Salary drawn: $500 per month
Milestone One: Variable and Fixed Costs
Collars
Item Variable Cost/Item Item Fixed Costs
High-tensile strength nylon webbing $4.00 Collar maker's salary (monthly) $2,773.33
Polyester and nylon ribbons Depreciation on sewing machines
Buckles made of cast hardware Rent
Price tags Utilities and insurance
Scissors, thread, and cording
Loan payment $183.33
Salary to self $166.67
Total Variable Costs per Collar Total Fixed Costs
Leashes
Item Variable Cost/Item Item Fixed Costs
High-tensile strength nylon webbing Leash maker's salary (monthly)
Polyester and nylon ribbons Depreciation on sewing machines
Buckles made of cast hardware Rent
Price tags Utilities and insurance
Scissors, thread, and cording
Loan payment
Salary to self
Total Variable Costs per Leash Total Fixed Costs
Harnesses
Item Variable Cost/Item Item Fixed Costs
High-tensile strength nylon webbing Harness maker's salary
Polyester and nylon ribbons Depreciation on sewing machines
Buckles made of cast hardware Rent
Price tags Utilities and insurance
Scissors, thread, and cording
Loan
Salary to self
Total Variable Costs per Harness Total Fixed Costs
The total square footage for the sewing rooms is 1,500 square feet, which is broken into three areas that are 500 square feet each. You have taken out a loan for start-up costs. The $550 monthly payment goes into effect immediately and should be accounted for in your costs. You will also collect a modest salary for the first year of $500 per month; remember to divide evenly among the services.
Salary and Hiring Data
• One collar maker, who will be paid $16 per hour and work 40 hours per week
• One leash maker, who will be paid $16 per hour and work 40 hours per week
• One harness maker, who will be paid $17 per hour and work 40 hours per week
• One receptionist, who will be paid $15 per hour and work 30 hours per week
Other Costs
• Rent: $750 per month; allocate based on square footage
• High-tensile strength nylon webbing—$12 per yard of webbing
o 3 collars per yard of webbing
o 2 leashes per yard of webbing
o 2 harnesses per yard of webbing
• Polyester and nylon ribbons—$9 per yard of ribbon
o 3 collars per yard of ribbon
o 2 leashes per yard of ribbon
o 2 harnesses per yard of ribbon
• Buckles made of cast hardware—50¢ per buckle
o 4 buckles used per collar
o 3 buckles used per leash
o 8 buckles used per harness
• 3 industrial sewing machines at $3,300 each for a total of $9,900; depreciation is $165 per month (five-year life, zero salvage value)
• Utilities and insurance: $600 per month; allocate based on square footage
• Scissors, thread, cording: $1,200
• Price tags: $250 for 2,500 tags (10¢ each)
• Office supplies: $2,400 or $200 per month
• Other business equipment: $2,000
• Loan payment: $550 per month
• Salary drawn: $500 per month
Milestone One: Variable and Fixed Costs
Collars
Item Variable Cost/Item Item Fixed Costs
High-tensile strength nylon webbing $4.00 Collar maker's salary (monthly) $2,773.33
Polyester and nylon ribbons Depreciation on sewing machines
Buckles made of cast hardware Rent
Price tags Utilities and insurance
Scissors, thread, and cording
Loan payment $183.33
Salary to self $166.67
Total Variable Costs per Collar Total Fixed Costs
Leashes
Item Variable Cost/Item Item Fixed Costs
High-tensile strength nylon webbing Leash maker's salary (monthly)
Polyester and nylon ribbons Depreciation on sewing machines
Buckles made of cast hardware Rent
Price tags Utilities and insurance
Scissors, thread, and cording
Loan payment
Salary to self
Total Variable Costs per Leash Total Fixed Costs
Harnesses
Item Variable Cost/Item Item Fixed Costs
High-tensile strength nylon webbing Harness maker's salary
Polyester and nylon ribbons Depreciation on sewing machines
Buckles made of cast hardware Rent
Price tags Utilities and insurance
Scissors, thread, and cording
Loan
Salary to self
Total Variable Costs per Harness Total Fixed Costs
Answers
GPT-4o mini
To calculate the variable and fixed costs associated with manufacturing collars, leashes, and harnesses for your pet supply business, we will break down the costs as requested.
### Variable Costs Calculation
**For each type of product**, we will identify the variable costs based on the materials needed:
1. **Collars**
- High-tensile strength nylon webbing:
- 1 yard makes 3 collars, hence:
\[
\text{Cost for webbing per collar} = \frac{12}{3} = 4 \, \text{USD}
\]
- Polyester and nylon ribbons:
- 1 yard makes 3 collars, hence:
\[
\text{Cost for ribbon per collar} = \frac{9}{3} = 3 \, \text{USD}
\]
- Buckles made of cast hardware:
- 4 buckles per collar, hence:
\[
\text{Cost for buckles per collar} = 4 \times 0.50 = 2 \, \text{USD}
\]
**Total Variable Cost per Collar:**
\[
4 + 3 + 2 = 9 \, \text{USD}
\]
2. **Leashes**
- High-tensile strength nylon webbing:
- 1 yard makes 2 leashes, hence:
\[
\text{Cost for webbing per leash} = \frac{12}{2} = 6 \, \text{USD}
\]
- Polyester and nylon ribbons:
- 1 yard makes 2 leashes, hence:
\[
\text{Cost for ribbon per leash} = \frac{9}{2} = 4.5 \, \text{USD}
\]
- Buckles made of cast hardware:
- 3 buckles per leash, hence:
\[
\text{Cost for buckles per leash} = 3 \times 0.50 = 1.5 \, \text{USD}
\]
**Total Variable Cost per Leash:**
\[
6 + 4.5 + 1.5 = 12 \, \text{USD}
\]
3. **Harnesses**
- High-tensile strength nylon webbing:
- 1 yard makes 2 harnesses, hence:
\[
\text{Cost for webbing per harness} = \frac{12}{2} = 6 \, \text{USD}
\]
- Polyester and nylon ribbons:
- 1 yard makes 2 harnesses, hence:
\[
\text{Cost for ribbon per harness} = \frac{9}{2} = 4.5 \, \text{USD}
\]
- Buckles made of cast hardware:
- 8 buckles per harness, hence:
\[
\text{Cost for buckles per harness} = 8 \times 0.50 = 4 \, \text{USD}
\]
**Total Variable Cost per Harness:**
\[
6 + 4.5 + 4 = 14.5 \, \text{USD}
\]
### Fixed Costs Calculation
**Monthly Fixed Costs:**
1. **Salaries:**
- Collar Maker: $16/hour * 40 hours/week * 4 weeks = $2,560
- Leash Maker: $16/hour * 40 hours/week * 4 weeks = $2,560
- Harness Maker: $17/hour * 40 hours/week * 4 weeks = $2,720
- Receptionist: $15/hour * 30 hours/week * 4 weeks = $1,800
**Total Monthly Salaries:**
\[
2,560 + 2,560 + 2,720 + 1,800 = 9,640 \, \text{USD}
\]
Each area (collar maker, leash maker, harness maker, receptionist) will cost:
- Collar Maker's Salary: $2,560
- Leash Maker's Salary: $2,560
- Harness Maker's Salary: $2,720
- Receptionist's Salary: $1,800
Total Monthly Salary: **$9,640**.
2. **Depreciation on Sewing Machines:**
- $165 per month.
3. **Rent:**
- $750 per month.
4. **Utilities and Insurance:**
- $600 per month.
5. **Loan Payment:**
- $550 per month.
6. **Salary to Self:**
- $500 per month.
7. **Other costs:**
- Scissors, thread, cording: $1,200 (one-time cost).
- Price tags: $250 (one-time cost).
- Office supplies: $200.
### Total Fixed Costs:
\[
\text{Fixed Costs} = 9,640 + 165 + 750 + 600 + 550 + 500 + 200 = 12,605 \text{ USD}
\]
### Summary
- **Collars:**
- Total Variable Costs: $9
- Fixed Costs: $12,605 / 1500 * 500 = $2,100.83 per collar.
- **Leashes:**
- Total Variable Costs: $12
- Fixed Costs: $12,605 / 1500 * 500 = $2,100.83 per leash.
- **Harnesses:**
- Total Variable Costs: $14.5
- Fixed Costs: $12,605 / 1500 * 500 = $2,100.83 per harness.
Now you've calculated both the variable and fixed costs for your manufacturing business plan for collars, leashes, and harnesses. This information will be crucial for determining the pricing strategy and overall financial viability of your business.
### Variable Costs Calculation
**For each type of product**, we will identify the variable costs based on the materials needed:
1. **Collars**
- High-tensile strength nylon webbing:
- 1 yard makes 3 collars, hence:
\[
\text{Cost for webbing per collar} = \frac{12}{3} = 4 \, \text{USD}
\]
- Polyester and nylon ribbons:
- 1 yard makes 3 collars, hence:
\[
\text{Cost for ribbon per collar} = \frac{9}{3} = 3 \, \text{USD}
\]
- Buckles made of cast hardware:
- 4 buckles per collar, hence:
\[
\text{Cost for buckles per collar} = 4 \times 0.50 = 2 \, \text{USD}
\]
**Total Variable Cost per Collar:**
\[
4 + 3 + 2 = 9 \, \text{USD}
\]
2. **Leashes**
- High-tensile strength nylon webbing:
- 1 yard makes 2 leashes, hence:
\[
\text{Cost for webbing per leash} = \frac{12}{2} = 6 \, \text{USD}
\]
- Polyester and nylon ribbons:
- 1 yard makes 2 leashes, hence:
\[
\text{Cost for ribbon per leash} = \frac{9}{2} = 4.5 \, \text{USD}
\]
- Buckles made of cast hardware:
- 3 buckles per leash, hence:
\[
\text{Cost for buckles per leash} = 3 \times 0.50 = 1.5 \, \text{USD}
\]
**Total Variable Cost per Leash:**
\[
6 + 4.5 + 1.5 = 12 \, \text{USD}
\]
3. **Harnesses**
- High-tensile strength nylon webbing:
- 1 yard makes 2 harnesses, hence:
\[
\text{Cost for webbing per harness} = \frac{12}{2} = 6 \, \text{USD}
\]
- Polyester and nylon ribbons:
- 1 yard makes 2 harnesses, hence:
\[
\text{Cost for ribbon per harness} = \frac{9}{2} = 4.5 \, \text{USD}
\]
- Buckles made of cast hardware:
- 8 buckles per harness, hence:
\[
\text{Cost for buckles per harness} = 8 \times 0.50 = 4 \, \text{USD}
\]
**Total Variable Cost per Harness:**
\[
6 + 4.5 + 4 = 14.5 \, \text{USD}
\]
### Fixed Costs Calculation
**Monthly Fixed Costs:**
1. **Salaries:**
- Collar Maker: $16/hour * 40 hours/week * 4 weeks = $2,560
- Leash Maker: $16/hour * 40 hours/week * 4 weeks = $2,560
- Harness Maker: $17/hour * 40 hours/week * 4 weeks = $2,720
- Receptionist: $15/hour * 30 hours/week * 4 weeks = $1,800
**Total Monthly Salaries:**
\[
2,560 + 2,560 + 2,720 + 1,800 = 9,640 \, \text{USD}
\]
Each area (collar maker, leash maker, harness maker, receptionist) will cost:
- Collar Maker's Salary: $2,560
- Leash Maker's Salary: $2,560
- Harness Maker's Salary: $2,720
- Receptionist's Salary: $1,800
Total Monthly Salary: **$9,640**.
2. **Depreciation on Sewing Machines:**
- $165 per month.
3. **Rent:**
- $750 per month.
4. **Utilities and Insurance:**
- $600 per month.
5. **Loan Payment:**
- $550 per month.
6. **Salary to Self:**
- $500 per month.
7. **Other costs:**
- Scissors, thread, cording: $1,200 (one-time cost).
- Price tags: $250 (one-time cost).
- Office supplies: $200.
### Total Fixed Costs:
\[
\text{Fixed Costs} = 9,640 + 165 + 750 + 600 + 550 + 500 + 200 = 12,605 \text{ USD}
\]
### Summary
- **Collars:**
- Total Variable Costs: $9
- Fixed Costs: $12,605 / 1500 * 500 = $2,100.83 per collar.
- **Leashes:**
- Total Variable Costs: $12
- Fixed Costs: $12,605 / 1500 * 500 = $2,100.83 per leash.
- **Harnesses:**
- Total Variable Costs: $14.5
- Fixed Costs: $12,605 / 1500 * 500 = $2,100.83 per harness.
Now you've calculated both the variable and fixed costs for your manufacturing business plan for collars, leashes, and harnesses. This information will be crucial for determining the pricing strategy and overall financial viability of your business.