SUBMITTED TO:

Sir Nukhaiz CH
SUBMITTED by:
Laiba afzal
Roll number:
bsf
DEPARTMENT:
BBA3th (Morning)
COURSE TITTLE:
Cost Accounting
PROJECT REPORT:
Manufacture business
BUSINESS INTRODUCTION:
My business plan is to
manufacturing ladies’ bag or handbag. A handbag,
commonly known as a purse or pocketbook in North
American English, is a handled medium-to-large bag
used to carry personal items. A bag held in the hand or
hung from a shoulder strap and used for carrying small
personal articles and money. These bags will be used by
girls. They will used by uni girls, teachers, or any job
holder woman. Such bags are traditionally marketed to
women, who use these bags to carry their cosmetics,
money, and personal belongings.

ORGANIZATION NAME:
Dreamy bag manufacturing company. (DBMC)
CAPITAL:
Considering my budget, the maximum startup cost of my business is around 20
lacs.
LOCATION OF MY BUSINESS:
My business locates in millet chowk Faisalabad.
PLACE:
Building where I am going to start this work is on rent. (10 Marla in 2722.51 square
feet)
(Rent=Rs.30,000)

PRODUCT INTRODUCTION:
My organization is going to manufacturing some ladies’ bags or purse
by the help of advance machinery. A purse, also known as a handbag, is a bag used
to carry money, wallets, phones, and other daily essentials. You can use handbags for
the function of transporting personal essentials or as a fashion statement. Basically,
ladies’ handbags utility is to keep the things as ladies don’t have pockets in their clothes.
Second thing ladies have so many things to keep so bag is necessary. and the next most
important thing is styling its used as an accessory of your whole look. More than a utility
it became a fashion now. So, my organization will produce the many bags of many kinds.
I have set a target that I will sell my products 150 in one month or 1,800 in one year. I
know I can’t achieve my full target but I able to achieve maximum 1,500 sale during the
year. I will receive order from many malls such as Lyallpur glaria, chase up and others
malls where the demand of hand bag is high. I will produce my product according to the
demand of the people. I will sell my products at those places where people can purchase
hand bag easily at 4000 costs. For example, now is wedding season, so I can sale my
hand bags in maximum quantity at high price because demand of hand bag is high during
this season. I will provide the maximum satisfaction to my customers.

AUTONOMY OF HAND BAG:

Here, I will explain some autonomy of hand bag.
ESSENTIAL BAG MAKING MATERIALS:
 Bag fabric
 Interfacing
 Sewing machine
 Webbing
 D rings & other rings
 Sliders
 Zippers
 Rivets
 Swivel snap hooks
 Magnetic hook
 Purse lock
 Bag bottom & feet
 Purse chains
 Frame for purses
 Embellishment
 Lining / interlining
 Grommets and setting tools
 Fabric protective spray
 Liquid starch
 Velcro

Bag Fabric:
The material with which a bag is made can make or break the appearance of the
bag. In fact, as you know, it is almost the whole bag. So, choose wisely. The important
criteria in choosing the fabric for making bags is that it is sturdy and durable, has the
appropriate structure, and looks attractive. The most frequently used materials are
canvas, vinyl, leather, pleather, etc.

Interfacing:
There are only a few bag fabrics that do not need interfacing (like leather,
fake leather, vinyl, thick canvas). All other fabrics need some interfacing to make them
look good enough and with enough structure for making bags.

Sewing Machine:
Even though a sewing machine is not a material but an equipment, I have
included it here because an appropriate sewing machine is essential for the success of
making professional looking bags. If you are making bags as a profession or with passion
you cannot do so for long with the regular home sewing machine – especially if you want
to work with beautiful fabrics like leather, canvas, etc.
Webbing:
Bag handles are usually made of the bag
exterior fabric itself. But webbing made of
nylon/cotton fibers makes it very convenient and
easy to make handles. They just need to be cut and
attached. The side edges of webbing are already
neatly finished and they are quite strong. Webbing
is available in various widths and many colors.

D rings & other rings:

A & D shaped ring is the most commonly
used hardware in bags to hang the straps.

Rectangle rings, oval shaped rings, square ones are all used, depending on the
straps/handles.

Sliders:
These plastic or metal rings with a divider in
between helps to increase or decrease the length of the
straps.
Zipper:
Zippers are commonly used for openings in bags /purses and bag pockets. Long
zippers with two zippers pull, one with metal zipper teeth, plastic ones, all are used to
make bags. You can personalize the regular zipper pulls with pretty accessories or
making customized zipper pulls like in the picture.

Rivets:
When you want to attach something on bags like
handles, without sewing, you have no substitute for
these.

Swivel Snap Hooks:

These are used to attach the straps – the straps can be conveniently
removed and used when needed with the help of this hardware.
Magnetic Hooks:
Another popular opening used in bag making-
this consists of two parts, like the regular snaps but because
of the magnet used in these snaps they are suitable to close
even the thickest of fabric flaps of your bag.

Purse Lock:
This refers to the locks placed as closures on
bag/purse flaps by the front.

Bag Bottom and Feet:

Bag feet are small buttons placed on
the bottom of bags on all four corners of bags so that
the bag material would not touch ground.

Purse Chains:
Purse chains also used for making a hand
bag.

Embellishment:
Different decorative elements are used to embellish bags – including
embroidery, applique. Metal studs are also used regularly on vinyl and leather bags as
accents.
FORMATION OF HAND BAG:
Here we will explain that how to make a leather bag by using all of the above materials.

Step 1:
To make a bag, first we will take a sheet and draw the whole map on it of bag. We
will create all the sides and body of the bag in this map.
Step 2:
Now place the map we made on top of the leather and cut the leather. We will
cut all the sides and body of the bag according to map.
Step 3:
We will put the interfacing on the leather and then attached them with the help of
iron or machine.
Step 4:
Now, we will make the straps of the bag. We will cut leather in the linear form
and here is also apply the interfacing on the leather and then attached them with the help
of iron etc. Here we will use sliders. These plastic or metal rings with a divider in between
helps to increase or decrease the length of the straps.
Step 5:
In this step, we will collect all the D rings and other rings, rivets, snap hook,
magnetic hooks etc. These are things will help us to make the bag.
Step 6:
In this step, we will stitch the zipper side. then stitch pockets which will be on the
bag or inner side of bag.
Step 7:
 Now we will make the bottom of the bag. in this step, we again take the leather
or interfacing and cut them according to sides to make the body of bag. We will use some
little button in the bottom of the bag so that the bag material not touch the ground.
Step 8:
All the material is ready, now it’s time to make the bag. we will curve the sides of
the bag from the bottom so we can attach the bottom side easily. We attached them with
the help of sewing machine.
Step 9:
Now, we will attach the straps through the sewing machine. Or we can attach
the straps through the D rings. we will also use chain in the place of straps.
Step 10:
We will use some embellishment for the decoration of hand bag. by using them
our bag will look much attractive.
And at last, our hand bag is ready to sale.

DIRECT MATERIAL:
Bag fabric (Leather) = 2,560*10kg. (1kg= Rs.2,560)
ss =Rs.25,600. (Assume we will produce 10 bags through 1kg
leather)
Per unit price of leather= 25,600÷100
=Rs.256
DIRECT LABOR:
Numbers of labor= 40
Cost of per labor= 50
Total labor cost = 40*50
=Rs.2,000

MANUFACTURING OVERHEAD

INDIRECT MATERIAL:
D rings & other rings Rs.5
Sliders Rs.10
Zippers Rs.17
Rivets Rs.7
Swivel snap hooks Rs.15
Magnetic hooks Rs.8
Purse lock Rs.20
Bag bottom and feet Rs.4
Embellishment Rs.8
Rent on building Rs.200. (30,000÷150)
Indirect Labor:
Salary of security guard Rs.134. (20,000÷150)
Manager’s salary Rs.234. (35,000÷150)
Electricity bill 600*47=Rs.28,200
Per unit electricity 28,200÷150=Rs.188
Misc. expenses Rs.1
Non-Manufacturing Overhead:
Selling cost & administrative expenses=Rs.15,000
Per unit selling & admin exp=15000÷150 =Rs.100
Price Of Per Unit =Rs.3,207
(This price is come by adding all of the about expenses or material etc.)
Fixed Cost:
Rent Rs.30,000
Selling & Admin expenses Rs.15,000
Manger’s salary. Rs.35000
Security guard salary Rs.20,000
Total fixed cost. Rs.100,000

Variable Cost:
Electricity bill Rs.188
Direct material Rs.256
Indirect material. Rs.94
Direct labor. Rs.2,000
Total variable cost Rs.2538

Manufacturing Overhead:

Rent Rs.30,000
Electricity bill Rs.28,200
Manager’s salary Rs.35,000
Security guard salary Rs.20,000
Indirect material Rs.94
Total manufacturing overhead Rs.1,13,294
 ELECTRICITY VARIABLE COST PER MOTNTH
variable cost = change in cost/change in activity
units produce change in electricity
High activity level (December) 170 30000
low activity level (august) 140 25000
Change 30 5000

variable cost = 5000/30

variable cost= 167

FIXED EXPENSES PER MONTH

Fixed cost element = total cost – variable cost element

Fixed cost element = 30000 – 167(170)

Fixed cost element=30000 – 28390

Fixed cost element =1610

Total Electricity Cost

Y=a+bx
Y=1610+167(150)
Y=26660
PREDETERMINED OVERHEAD RATE
Total Estimated M.O.H cost
Y=a+bx
Fixed exp(a): 100000
Variable exp (b):2538
Total allocation base= 150 units
Y= 100000+2538(150)
Y=100000+380700
Y=480700
predetermined overhead rate= estimated M.O.H cost /total
amount of allocation base

predetermined overhead= 480700/150

predetermined overhead= 3204 per unit

ICOME STATEMENT

contribution format income statement

Sales(4000 x 150) 600000
Variable exp 481050
C.G.S (3207x150)
Contribution margin 118950
Fixed expense 100000
Net operating income 18950

BREAK-EVEN POINT
Break-even point= fixed cost/sale price per unit – cost per Unit
Break-even point= 100000/4000-3207
Break-even point= 100000/793
Break-even point=126 units
IN RUPEES = break even x sale in rupees
IN RUPEES = 126 x 4000
IN RUPEES =504000

DEGREE OF OPERATING LEVERAGE

Degree of operating leverage =contribution margin/ net operating income
Degree of operating leverage =118950/18950
Degree of operating leverage =6.27

MARGIN OF SAFETY
Margin of safety in dollars = total budgeted (or actual) sales − Break-even Sales
Margin of safety in dollars =600000-504000
Margin of safety in dollars =96000
Margin of safety percentage = Margin of safety in dollars /Total budgeted (or
actual) sales in
dollars
Margin of safety percentage = (96000/600000) *100
Margin of safety percentage =16%

SALES BUDGET:
Dreamy bag manufacturing
Sales budget
For the year ended Dec 31,2022
Quarter

1 2 3 4 yearly
Budgeted sale 200 300 500 400 1410
Selling price 4000 4000 4000 4000 16000
Total sales 800000 1200000 2000000 1600000 22560000

Percentage of sale Collected In the Period Of sale 70%

After sale collect 30%
First quarter sales 560000 240000 800000
Second quarter 840000 360000 1200000
sales
Third quarter sales 1400000 600000 2000000
Fourth quarter sales 1120000 1120000
Total cash 560000 1080000 1760000 1720000 5120000
collection

PORODUCTIION BUDGET:
Dreamy bag manufacturing
Production budget
For the year ended Dec 31; 2022
Quarter

1 2 3 4 Yearly
Budgeted sale 200 300 500 400 1400
Add desired ending 60 100 80 70 70
Total needs 260 400 580 470 1470
Less beginning 60 60 100 80 60
inventory
Required 200 340 480 390 1410
production in case

DIRECT MATERIAL BUDGET:

Dreamy bag manufacturing
Direct martial budget
For the year ended Dec 31; 2022
Quarter

1 2 3 4 Year
Required 200 340 480 390 1410
production
Raw martial 256 256 256 256 256
needed
Need to meet 51200 87040 122880 99840 360960
production
Desired ending 8704 12288 9984 10300 10300
59904 99328 132864 110140 371260
\Less opening 9000 8804 12288 9984 9000
Cost of raw 50904 90624 120576 100156 362260
martial to be
purchased

Purchased paid In the Period 60%

After purchased paid 40%

1st quarter 30542 20361 50904

purchases
2nd quarter 54374 36250 90624
3rd quarter 72345 48231 20576
4th quarter 60093 60093
Total cash 30542 74735 108595 108324 322196

DIRECT LABOR BUDGET:

Dreamy bag manufacturing
Direct labor budget
For the year ended Dec 31; 2022
Quarter

1 2 3 4 Year
Required 200 340 480 390 1410
production
D.L.H per 0.75 0.75 0.75 0.75 0.75
Labor hour 150 255 360 293 1050
needed
Labor cost per 2000 2000 2000 2000 2000
Total cost 300000 510000 720000 586000 2116000
MANUFACTURING OVERHEAD BUDGET:

Dreamy bag manufacturing

M.O.H budget
For the year ended Dec 31; 2022
Quarter

1 2 3 4 Year
Labor hour 150 255 360 293 1050
needed
Manufacturing 556 556 556 556 556
cost per
Variable 83400 141780 200160 162908 588248
manufacturing
overhead
Fixed 85000 85000 85000 85000 340000
manufacturing
Total 168400 122698 285160 247908 928448

CASH BUDGET:
Dreamy bag manufacturing
Cash budget
For the year ended Dec 31; 2022
Quarter

1 2 3 4 Year
cash collection 560000 1080000 1760000 1720000 5120000
from customers
Direct martials 30542 74735 108595 108324 322196
Direct labor 300000 510000 720000 586000 2115000
M.O.H 168400 122698 285160 247908 928448
Selling and 15000 15000 15000 15000 60000
administrative
expenses
Available cash 46058 357567 631245 762768 1797638