ACC2CAD Module: Cost and Profit Analysis of Wooden Study Table Report

This report presents a detailed cost and profit analysis of a wooden study table. It begins with an introduction outlining the product's design, purpose, and key features, emphasizing its multi-functional use, space-saving design, and affordability. The report then breaks down the costs associated with manufacturing, including research and development (which is stated as minimal in this case), materials (wood, nails, and Fevicol), labor, and manufacturing overheads. It calculates the cost per unit, differentiates between variable and semi-fixed costs, and outlines production details, including beginning and closing inventory of raw materials, work in process, and finished goods. The sales price is determined based on industry profit margins, and selling and administrative costs, including advertising and sales personnel expenses, are estimated. Finally, the report presents an income statement, summarizing sales, cost of goods sold, administrative expenses, and profit, providing a comprehensive financial overview of the product's potential profitability. The report concludes with a list of cited references.

ACC2CAD
PRODUCT: TABLE
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Table of Content
Contents
Introduction...........................................................................................................................................3
Point 1...............................................................................................................................................3
Research and Development Cost- Point 2.............................................................................................3
Configuration of the Product- Point 3....................................................................................................4
Production Carried Out- Point 4............................................................................................................4
Work in Process- Point 5.......................................................................................................................5
Cost of Goods Sold- Point 6...................................................................................................................5
Sales Price- Point 7................................................................................................................................6
Selling & Administration Cost................................................................................................................6
Income Statement.................................................................................................................................6
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Introduction
Point 1
The report has been written with an intention to segregate and present the cost and profit
analysis of table. The report presents a detailed break up of cost incurred in manufacturing a
table along with the profit earned on selling the tables. The product dealt is a wooden study
table and primarily use three materials i.e Wood, Fevicol for sticking and iron nails. The
graphic presentation of the table manufactured has been detailed here-in-below:
Reason for designing a Wooden Study Table
The product has been primarily designed to ease studying on laptop as well as with books
while sitting on the bed. The said product shall reduce the cost of entire study table set and
shall require less space compared to a full- fledged study table. The product shall be available
at cheap price in the market and can be purchased by all segment of the society. The chief
characteristic of Product has been detailed here-in-below:
(a) Multi Use table- For Study via Laptop, Book , Dinner table etc;
(b) Less Space Requirement and foldable and placed in cupboard;
(c) Cheap;
(d) Flexible and easily carried;
(e) Can be afforded by all sections of the society;
(f) Rust and Termite Free.
The chief motivation behind developing the product is the trouble faced by myself during my
studies to sit on a chair and study which became quite tiring at times. Thus, in order to
modernise and ease studying, the aforesaid product has been designed and it is expected shall
be well absorbed among the college, school and working professionals.
Research and Development Cost- Point 2
Since the said product does not use any high technology nor does it involve any significant
formula, it shall be worthwhile to state the product development does not have any Research
and Development Cost. The said product has been conceived based on personal experience.
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Configuration of the Product- Point 3
The Configuration of the product has been detailed here-in-under:
(a) Wood : 10 Square Feet per Unit . Cost per Square feet of wood $ 2
(b) Nails: 4 Nails , Cost per Nail : 0.25$
(c) Fevicol: 50 ML per Unit: Cost per 1 Litre of Fevicol: $ 2 (Phillip Plantation Shutters Pty
Ltd A, 2018)
(d) Labour Hours : 30 Minutes : Cost per Labour Hour: $ 21 (Phillip Plantation Shutters Pty
Ltd A, 2018)
(e) Manufacturing Overheads: 20 Minutes Machine Cost per Hour : $21 (ABC, 2016)
On the basis of above details, the cost of manufacturing a full-fledged wooden table has been
detailed here in below:
Sl. No Particulars Cost per Unit ($)
1 Wood (10*2) 20
2 Nails (4 Nails* .25) 1
3 Fevicol (50/1000*2) .1
4 Labour Hours (21*.5) 10.5
5 Manufacturing Overheads (20/60*21) 7
Total 38.6
On perusal of the above, it can be inferred that the cost per unit for manufacturing the table
shall be around $ 38.6 and the same can be further reduced by producing on a large scale.
Since, this is early stage of the business the said cost shall continue to exist for a certain
period of time.
Of the above categorisation, the cost of wood, the cost of nails, the cost of fevicol, labour cost
are variable in nature and shall vary in terms of production. However, labour is a bit semi-
fixed as labour has to be paid a six hour salary irrespective of level of work. Considering, the
forecasted demand for the product it shall be variable.
Further, Manufacturing overheads primarily comprise of machine hours which is semi fixed
in nature as cost of machine operator and depreciation is fixed and shall be incurred
irrespective of level of production carried out while the cost of electricity is variable in nature
and shall fluctuate with level of production carried out.( Cost has been computed based on
absorption costing).
Production Carried Out- Point 4
The beginning inventory of the product has been assumed to be $ 2000 encompassing three
raw materials to be used in the product which is wood, nails and Fevicol. Further, it has been
assumed that the closing inventory shall also remain same during the end of the period. The
inventory status has been described here-in-below:
Inventory
Sl. No Particular Quantity Price Amount
1 Opening Inventory 2000
2 Raw Material Purchased
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Inventory
Sl. No Particular Quantity Price Amount
Wood 10000 2 20000
Fevicol 50 2 100
Nails 4000 0.25 1000
3 Closing Inventory 2000
4 Inventory issued 0 21100
Work in Process- Point 5
The beginning work in process of the product has been assumed to be $ 30000 encompassing
three raw materials to be used in the product which is wood, nails and Fevicol along with
conversion cost encompassing direct labour and machine work . Further, it has been assumed
that the closing inventory shall also remain same during the end of the period. The work in
progress status has been described here-in-below:
WIP
Sl No Particular Quantity Price Amount
1 Opening WIP 30000
2 Raw material Cost
Wood 10000 2 20000
Fevicol 50 2 100
Nails 4000 0.25 1000
Direct Labour 500 21 10500
Machine Hours 333.3333 21 7000
3 Closing WIP 30000
4 Cost of Good Manufactured 1000 38600
Cost of Goods Sold- Point 6
The beginning finished product has been assumed to be $ 50000. Further, it has been
assumed that the closing inventory shall also remain same during the end of the period. The
finished good status has been described here-in-below:
Cost of Goods Sold
Sl. No Particular Quantity Price Amount
1 Opening FG 50000
2 Cost of Good Manufactured 1000 38600
3 Closing WIP 50000
4 Cost of Good Sold 1000 38600
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Sales Price- Point 7
The sales margin of the furniture industry is near about 50% on cost at present. Further, since
the product is new and an innovation, initially the margin of the product shall be high. Thus,
the margin of the product has been assumed at 100% in the initial stage of production and
shall decrease over time. Thus, the sale price per unit shall be $ 80 ( Approx. Rounded off)
(Woodruff, 2019)
Selling & Administration Cost
Since, it is a new product advertising need shall be around $ 3000. Further, the cost of a sales
person shall be around $ 3000 per month. There shall be 2 sales person. In addition to above,
the cost of pamphlet distribution shall be $1000. Totalling $ 10,000 (Kanapi, 2017)
Income Statement
The income statement for the proposed product has been presented here-in-below:
Income Statement
Sl. No Particular Quantity Price Amount
1 Sales Price 1000 80 80000
2 Cost of Goods Sold 1000 38.6 38600
3 Administrative & Distribution Expense 1000 40 30000
4 Earning before Tax 1000 1400
5 Tax 420
6 Net Profit 980
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References
ABC, 2016. Minimum wage: How does Australia compare to other countries?. [Online]
Available at: https://www.abc.net.au/news/2016-05-31/minimum-wage-how-does-australia-
compare/7461794
[Accessed 11 May 2018].
Kanapi, A., 2017. 2018 Newspaper Advertising Costs: Full, ¼ & ⅛ Page Rates. [Online]
Available at: https://fitsmallbusiness.com/newspaper-advertising-costs/
[Accessed 11 May 2019].
Phillip Plantation Shutters Pty Ltd A, 2018. Timber Supplies and Products. [Online]
Available at: http://paulowniatimber.com.au/prices.php
[Accessed 11 MAy 2019].
Woodruff, J., 2019. The Average Profit Margin in Furniture. [Online]
Available at: https://smallbusiness.chron.com/average-profit-margin-furniture-37917.html
[Accessed 11 May 2019].
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