Economic Fit Assessment of Pet Grooming Gloves
The gloves will make good returns on investment. Will our pet grooming glove survive in the current economy? According to the 2017/2018 National pet owner’s research survey, 85 million families own a pet. This is approximately a 68% of U. S households. In 1988 when the first survey of the kind was conducted only 56% of United States households owned a pet ("Facts + Statistics: Pet statistics | III,"). 2 million dogs, 47. 1 million cats, and 2. 6 million horses in America alone, there is a strong base locally for our product. Economic Feasibility Pricing A pair of Pet grooming gloves sells for between 5 U. S dollars to 15 U. Pet grooming gloves sold at this rate will have a higher demand and will be mostly sold at all stalls. Frequency The pet population is expected to increase in America.
This is because pets will give birth to more pets. The human population will also increase. More households will want to have a dog or a cat ("United States - the number of pet, by species, 2017/2018 | Statistic,"). They will enhance cleaning activities on animal fur. They will have additional enhancements to manage skin therapy. Pet grooming gloves should be comfortable for those who wear them. Most people we tested our gloves on were very pleased with the comfort the gloves offered. Our gloves will be economically feasible. The production of pet grooming gloves will have both fixed and variable costs. Total operation costs = Fixed cost + variable cost Fixed Costs There will be depreciation charges on the manufacturing equipment. Depreciation will be charged on a reducing balance formula at the rate of 10% per annum.
There are also insurance premiums that the company will pay. The machines to be used in manufacturing have been insured against theft and various forms of break down while at work. Each unit will be made of a combination of the raw materials. Direct labor hours will also make up the variable costs of producing pet grooming gloves. Direct labor hours will involve determining the labor rate for each worker for each hour he works. They will include basic and overtime pay. Packaging costs will also be variable costs. It will also assist the firm in ordering the best amount of raw materials to prevent overstocking and scarcity of raw materials for the manufacturing process of the gloves. Since pet grooming gloves are slow-moving items, the inventory costs may be high if we do not maintain stock at EOQ (Miller, 2011).
Budgeting Budgeting is an important tool in cost control. Budgets will prevent the firm from making use of expensive materials. Operating within the set budget will also ensure that the firm will not go beyond the set salaries and wages for factory workers. Our production was dealing with plastic for the bottles. The pet grooming gloves will also be made using plastic. The use of the same raw material for the firm will offer advantages to the firm. Cost reduction on raw material There will be an increase in the number of orders for plastics in the firm. This is because plastic will now be used on two of our products: the pet grooming gloves and plastic baby bottles. The organization’s decision to manufacture and launch pet grooming gloves will assist in the utilization of all employees.
This will stop paying wages for little labor because of failure of PBM. The decline in orders of PBM plastic bottles would have resulted in layoffs that would have had a negative impact on the organization (University of Virginia, 2013). New Markets The new pet grooming gloves will offer the company the chance to reach new markets. New markets allow organizations to have better chances of generating considerable amounts of revenue. Manufacturing costs are the costs that will have to be incurred to convert raw materials into finished products. There will be direct material costs. This will be the cost of all the raw inputs acquired for the production process to be completed. There will be the cost of plastic, fiber, silicone, and nylon.
Direct labor costs will also be incurred in the production of pet grooming gloves. Machine idleness benefits are based on the calculation of machine utilization. Staff idleness is based on machine utilization because workers are the ones who run those machines. Labor idle time varianceare costs for standby time in direct labor that was not utilized in production for reasons such as mechanical and equipment failure, lack of orders and industrial disputes. Idle time variance is calculated using the formula: Idle time variance= number of idle hours * Standard rate Projected costs Associated with pet grooming gloves Inventory costs $30,000 Total Production costs $100,000 Total $130,000 Cost-Benefit analysis is achieved by calculating the difference between the benefits of the production of pet grooming gloves and the costs associated with its manufacturing.
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