ACCT351- 1404B-01 Cost Accounting Executive Summary Quesadra D. Goodrum Individual Project Phase 4 Colorado Technical University Instructor: Jackie Russell Date: 12/06/2014 RUNNINGHEADER:ACCT351-1404B-01 1 Executive Summary Products from Goodrum Electronics will be made of high quality threaded metal insert fasteners which are to be used in a myriad of fastening applications for Original Equipment Manufacturers (OMEs) as well as several other companies in the industry. The company will specialize its business on standard and custom produced thread metal inserts for applications such as furnitures, plastic, medical and electronics among others for the high end retail custom and commercial markets. The founders of this company have fast and wide experience in the manufacture and sales management of threaded metal inserts as well as the industry as a whole. The products will be marketed under the auspices of Goodrum Electronics, Inc. which is a holding company which has a combined staff, office space and administration costs. For this particular case the products that will be brought forward as a separate entity. Having been involved with the manufacture and sale of both standard as well as custom manufactured threaded metals over the years, the business owners thereby saw the need for custom fasteners line with a wide selection of design choices, high end finishes with top notch organization, customer relation and quality. The company’s mission is centred at establishing a well built market standing in the high-end retail, customs and commercial fastenings segments. The business ‘revenue is expected to grow significantly from FY1 to FY2 and by maintaining an average gross margin of above 25%, well it is expected that the business’ net profit will rise to FY3. The capital and expenses to start the business will be provided by the owners, as well as a 3 year commercial loan that will help cater for the expenses. 1.1 Objectives Company objectives: · Be the lead in metal inserts and custom threaded fasteners supplier to high-end special order segment in the regional market. · Gain gross revenue that doubles the earnings of Year1 by the end of Year2. · Company targets are as follows: 20% of sales in high-end retail customer segment 70% of sales in Custom-range customer segment 10% of sales in commercial development segment 2.1 Start-up Summary The following outline will be showcasing the overall startup expenses, machine tools, software, stationery and general expenses. The start up capital will be financed by a great margin by Quesadra Goodrum and Roderick Goodrum. Additionally a 3 year commercial loan will be taken to assist in meeting the required cash flow needs. Products The following are our chosen products they are all comprised of several main inputs which are as follows: Threaded inserts Will suit any insert application. The advantage of insert installation after molding is strength. Compression Limiters This will b.

1. ACCT351- 1404B-01
Cost Accounting
Executive Summary
Quesadra D. Goodrum
Individual Project Phase 4
Colorado Technical University
Instructor: Jackie Russell
Date: 12/06/2014
RUNNINGHEADER:ACCT351-1404B-01 1
Executive Summary
Products from Goodrum Electronics will be made of high
quality threaded metal insert fasteners which are to be used in a
myriad of fastening applications for Original Equipment
Manufacturers (OMEs) as well as several other companies in the
industry. The company will specialize its business on standard
and custom produced thread metal inserts for applications such
as furnitures, plastic, medical and electronics among others for
the high end retail custom and commercial markets. The
founders of this company have fast and wide experience in the

2. manufacture and sales management of threaded metal inserts as
well as the industry as a whole. The products will be marketed
under the auspices of Goodrum Electronics, Inc. which is a
holding company which has a combined staff, office space and
administration costs. For this particular case the products that
will be brought forward as a separate entity.
Having been involved with the manufacture and sale of both
standard as well as custom manufactured threaded metals over
the years, the business owners thereby saw the need for custom
fasteners line with a wide selection of design choices, high end
finishes with top notch organization, customer relation and
quality. The company’s mission is centred at establishing a well
built market standing in the high-end retail, customs and
commercial fastenings segments. The business ‘revenue is
expected to grow significantly from FY1 to FY2 and by
maintaining an average gross margin of above 25%, well it is
expected that the business’ net profit will rise to FY3. The
capital and expenses to start the business will be provided by
the owners, as well as a 3 year commercial loan that will help
cater for the expenses.
1.1 Objectives
Company objectives:
· Be the lead in metal inserts and custom threaded fasteners
supplier to high-end special order segment in the regional
market.
· Gain gross revenue that doubles the earnings of Year1 by the
end of Year2.
· Company targets are as follows:
20% of sales in high-end retail customer segment
70% of sales in Custom-range customer segment
10% of sales in commercial development segment
2.1 Start-up Summary

3. The following outline will be showcasing the overall startup
expenses, machine tools, software, stationery and general
expenses. The start up capital will be financed by a great
margin by Quesadra Goodrum and Roderick Goodrum.
Additionally a 3 year commercial loan will be taken to assist in
meeting the required cash flow needs.
Products
The following are our chosen products they are all comprised of
several main inputs which are as follows:
Threaded inserts
Will suit any insert application. The advantage of insert
installation after molding is strength.
Compression Limiters
This will be in the form of non-threaded bushings used in
applications. This is done to escape the damages that could be
caused to the plastic component by the tightening of the bolt or
screw.
Installation Tools and Equipment’s
A myriad of installation methods for the selected inserts
currently exists. However, our applications imposed by our
engineering team recommend doing installations through custom
built systems for the custom fixture.
Products
· Molded-In Inserts Standardized
· Molded-In Inserts w/ Shoulder/Chamfer Standardized
· Molded-In Inserts Studded
· Pressed-In Inserts Standardized
· Bi-Sert Inserts
· Fiber-Sert Inserts
· Intro-Sert Inserts
· Multi-Sert Inserts
· Quick-Sert Inserts
· Sharp-Sert Inserts
· TriSert Inserts
· Zap-Sert Inserts

4. · Installation Methods & Tools
Market Analysis Summary
Our focus market is that of the organization, construction as
well as manufacturing industry, contractors and procurement
contractors in the surrounding area that are involved in high end
retail. This market shall encompass both custom and
commercial development sectors combined.
5.2.1 Sales Forecast
The table below shows the projection for our gross products
sales. The projection forecasts our potential for strong sales
growth over the duration of the next three years. This includes
potential sales due to the expected to be growth of our business
in the years to come.
Sales Forecast
YEAR 1
YEAR 2
YEAR 3
Sales
Combined Product Sales
442000
1000000
1500000
Other
0
0
0
TOTAL SALES

5. 442000
1000000
1500000
Direct Cost of Sales
Year 1
Year 2
Year 3
Cabinets
301600
725000
1087500
Other
0
0
0
Subtotal Direct Cost of Sales
301600
725000
1087500
Market Analysis

6. YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Potential Customers
Growth
CAGR
High End Retail
3%
5260
5418
5581
5748
5920
3%
Custom Range
5%
3500
3675
3859
4052
4255
5%
Commercial Development
7%
10000
10700
11449
12250

7. 13108
7%
Total
5.55%
18760
19793
20889
22050
23283
5.55%
5.3 Milestones
Outlined in the table are the following important milestones for
the program along with dates as well as Official in charge and
the respective budget for each. The milestones emphasizes on
the planning and implementation for each program.
MILESTONES
Milestone
Start Date
End Date
Budget
Manager
Department
Business Plan
1/16/2014
1/30/2014
2000

8. Q. Goodrum &R. Goodrum
Marketing
Online Research
1/16/2014
1/20/2014
350
Q. Goodrum
Marketing
Open Accounts with Suppliers
1/16/2014
1/27/2014
350
Q. Goodrum
Web
Product Research
1/16/2014
1/27/2014
500
Q. Goodrum &R. Goodrum
Web
Product Design
1/16/2014
1/30/2014
459
R. Goodrum
Department
Order Sample Products
1/23/2014
2/2/2014
1000
R. Goodrum
Department
Design Sales Literature
1/23/2014
1/30/2014
1000

9. Q. Goodrum &R. Goodrum
Department
Print Sales Literature
2/2/2014
2/8/2014
300
R. Goodrum
Department
Make Industry Contacts
1/16/2014
3/1/2014
1000
Q. Goodrum &R. Goodrum
Department
Showroom Feasibility Study
1/26/2014
2/1/2014
1000
Q. Goodrum &R. Goodrum
Department
Totals
7959
Management Summary
The president, Quesadra Goodrum, has 20 years of experience
in the custom made to order manufacturing field, varying from
general contracting, manufacturing management, and having his
own manufacturing business. Roderick Goodrum, the Vice
President on the other hand has seven years of manufacturing
management experience and has spent the past seven years in
senior management positions in the hospitality industry. An
administration assistant and sales office manager are expected
to be recruited as the business grows.

10. 6.1 Personnel Plan
This table outlines business salaries paid in its entirety. The
increments of each are maintained to aid in the projection of
growth for the business. Plans have been made to hire an
administrative assistant to monitor each within the year.
The projections for this year on a monthly increment are as
follows:
PERSONNEL PLAN
YEAR 1
YEAR 2
YEAR 3
Carrolyn Etheridge
24000
38000
45000
Chevern Goodrum
24000
35000
40000
Operators
18000
60000
85000
Administration Assistant
12000
24000
25000
TOTAL PEOPLE
4
6
7
Total Payroll

11. 78000
157000
195000
Financial Plan
Outlined below are the initial financial objectives for the
business:
· Obtain an operating line of credit from a financial institution.
· Finance growth through retained earnings.
· Operate on a 25-30% gross margin.
The financial plan for Goodrum Electronics Products is
described in the following sections.
7.1 Important Assumptions
The financial plan is dependent on important assumptions which
are outlined in the table below as annual assumptions.
Sales Monthly
Combined Sales
Other
1
0
0
2
0
0
3
20000
0
4
30000
0
5
50000
0

12. 6
40000
0
7
30000
0
8
60000
0
9
70000
0
10
50000
0
11
30000
0
12
20000
0
7.2 Break-even Analysis
After the start-up as well as plant costs are paid off and the
business re-stabilizes the monthly operating costs on average
are expected to increase slightly and then resettle. The table
below indicates that the business would need to sell a minimum
of 16 units or 14” standard units and or its equivalent of
threaded metal inserts fasteners a month in order to break even.
Manufacturing costs and Costing
Manufacturing costs covering design and engineering activities
have decisive effects on total manufacturing costs. These are
the following reasons that these were not chosen.
PROCESS AND JOB-ORDER COSTING
Process costing is the most common method used by companies
in costing. It is used mostly in mass production environment.

13. Well the process cost system evaluates the net cost of
manufacturing process over a specified period of time.
Calculation is done for every step to reach at a unit cost average
for the whole production process.
The other major costing method is job-order costing. In this
method tracking is done on all the costs on an individual
product basis. This is applicable to situations where everyunit
of production is custom made or few units manufactured. The
precise costs incurred in the production of a certain unit are
recorded and are not generally averaged with those of any other
unit, because each unit may be different. One manufacturer can
employ both process as well as job-order costing for different
parts of the operations.
ACTIVITY-BASED COSTING
Activity-based costing (ABC) is an additional method to the two
traditional costing methods. ABC gathers all the costs related to
one manufacturing activity, irrespective of whether these come
under the columns of labor or materials or any other thing
expensively. Use of this method is sometimes referred to as
activity-based cost management (ABCM) or simply activity-
based management (ABM).
Activity-Based Costing is mostly appropriate for a company that
has a significant amount of overhead pertaining diversity of
activities in provision of services or goods to customers with
varied demands (Horngren, 2012). The overhead implied can be
manufacturing overhead, administrative overhead or the selling
expenses. Often within a company customers demand activities
that drive up the selling expense, manufacturing overhead and
administrative overhead. Therefore, with respect to Activity
Based Costing, products and customers responsible for the
occurrence of the manufacturing and administrative overheads
have to be assigned appropriate costs. Hence, where there are
diversity of customers and products, it is not appropriate to
allocate the cost of activities to all products and customers
based on a single activity like machining hours. The non-

14. machining overheads within the company should be assigned to
customers and products that require other activities.
DETERMINING PROFITABILITY THROUGH CVP
ANALYSIS
A cost equation merged with revenue equations establishes
profitability at varying stages of the value stream. This is
known as cost-volume-profit (CVP) analysis. The equations
conclude that the net income willequal the total total revenue
minus the total cost; the total cost will equal the average
variable cost multiplied by the quantity of output plus the fixed
cost; and total revenue will equal the price times the quantity of
outputs sold. This provides a multi method checks and balance
system. Thus in utilizing the cost and revenue equations we can
show how the net income equals price time’s quantity of outputs
sold minus average variable cost times the quantity of outputs
minus all associated fixed costs. That is,
where P = price,
Q = quantity of output,
AVC = average variable cost
FC = fixed costs
This is known as the cost-volume-profit equation, and is an
extensively-used cost accounting tool. Capital investments
represent long-term investments where the assets are involved
have useful lives of several years. An appropriate example is
building a new production facility and purchasing in machinery
and equipment which are capital investments. Capital budgeting
is a technique of evaluating the financial feasibility of a capital
investment for period of the life of the investment.
A capital budgeting breakdown carries out estimations to
examine if the gains, measured in cash inflows, are adequate to
repay the business for the cost of the asset and the cost of
financing the asset in terms of interest, etc. Capital
expenditures are expenditures the business will undertake for
future value. These will be incurred when purchasing fixed
assets or adding value to the existing fixed assets. The company

15. will use capital budgeting todetermine if a machine is deserves
is Acquisition price. The internal Rate of Return can be utilized
when the business needs to acquire a new machinery or piece of
equipment. For example, a machine which costs $16,980 and
provides cash inflow of $3,000 annually for 12 years can have
the internal rate of return determined: IRR 14%. This is why we
have chosen to use this in retrospect to other costing methods.
References
Horngren, Datar, Foster. (2012). Cost Accounting: A
Managerial Emphasis. Upper Saddle River, New Jersey:
Peasrson Custom Publishing.
Joe Ben Hoyle and C. J. Skende. Finacial accounting. Vol. 1
Michael Cafferky. Breakeven analysis. The definitive guide to
cost volume profit analysis.
Business Expert Press, Aug 11, 2010.
Roman l. Weil, Katherine Schipper and Jennifer Francis.
Financial Accounting: An Introduction
to Concepts. November 12, 2012
Percentage Market Share High Range Retail Custom Range
Commercial Development 15 10 75