Assume you are going to start your own business. Think about your talents and interest and come up with a small business idea that provides a unique product or service to local customers. Here are a few ideas if your "creative juices" aren't flowing:
Wedding Planning Consulting
Flower shop
Interior Design Business
Web Design Company
River-rafting company
Car detailing Business
Small repairs/carpentry Business
Catering
After you make your selection, answer the following questions:
1. What would the major costs of your business be? Classify these into the areas of direct materials, direct labor, manufacturing overhead, general and administrative costs, and selling cost. You might not have something in every category.
2. Why would you need to determine the cost of providing your product or service to individual customers? What types of decisions do you expect to make based on this job order cost information?
3. In general, would you expect your company's indirect(overhead) costs to be less or more than the direct costs(direct material and direct labor)? What allocation base do you think you would charge overhead costs to individual customers? How much do you think the overhead rate would need to be?
4. Create a job cost sheet for a hypothetical "average" customer that includes estimates of the major costs or serving that customer. How much do you think you would need to charge to cover all of the cost plus provide a reasonable profit?