1. Complete) Write out the yearly cost formula in a Y = a + bX format. Be sure to include both manufacturing costs and nonmanufacturing costs in the cost formula.

2. Complete) Assume that you make and sell 7,800 t-shirts in the first year. Use the cost formula to calculate your first year's total cost. If you sell these t-shirts at $15 each, how much would your net profit be in the first year?

Business Costs Product or Period Cost Variable or Fixed Cost Per Unit Cost (Variable) Annual Cost (Fixed) Product Fixed $10,000 $300 x 12 designs Artist - contract Artist - design fee Product Fixed $3,600 Computer/Printer Product Fixed $5,400 Computer/Printer Period Fixed $600 One-time startup costs - not included in annual expenses One-time startup costs - not included in annual expenses $5400 less residual value (50) / 3 yrs $1800 3 = $ $600 less residual value (SC)/3 years = $200 $4500 less residual value (SO) / 3 years $1500 = Depreciation - Computer/Printer Product Fixed $1,800 Depreciation - Computer/Printer Period Fixed $200 Depreciation - Heat Press Machine Product Fixed $1,500 One-time startup costs - not included in annual expenses Heat Press Machine Product Fixed $4,500 Period Fixed $3,600 $2250 per month x 12 mos Liability Insurance Mall Rent 90% Product Fixed $27,000 $250 per month x 12 mos Mall Rent 10% Period Fixed $3,000 Owners (shared) Period (S/A) Fixed $12,000 $1000 per quarter x 4 qtrs Parties Period Fixed $4,000 $125 per month x 12 mos Storage Unit Product Fixed $ $1,500 Inkjet Cartridges Product Variable $0.10 $50/500 prints - $0.10/print...1 print per shirt 1 flyer print - $0.10, print one every 5 shirts, so $0.10/5 $0.02 = , 5 1 flyer paper $0.10, print one every 5 shirts, so $0.10/5 - $0.02 , $5 $ Inkjet Cartridges Period Variable $0.02 Laser Paper Period Variable $0.02 $8.00/10 shirts $0.80 per shirt (DL $8/hr, make 10 shirts per hour) Product (Transfer) Variable $0.80 $8.00/20 shirts $0.40 per shirt (DL $8/hr, fold 20 shirts per hour) Student Workers (3) 3 Student Workers (3) 3 Period (Folding/Wrapping) Variable $0.40 T-shirts Product Variable $3.75 $400/1000 sheets $0.40/sheet...1 transfer paper per shirt Transfer Paper Product Variable $0.40 Wrapping Paper/Box / Period Variable $0.20 Fixed (a) Variable (b) $68,200 $5.69 (Artist contract Artist design fee Printer Depreciation. Heat Press Depreciation - Liability Insurance + Mall Rent (both). Owners token salary Parties - Storage Unit) (Inkjet cartridges (both) Laser Paper + Workers (both) T-shirts +Transfer Paper Wrapping Paper/Box) Business Costs Product or Period Cost Variable or Fixed Cost Per Unit Cost (Variable) Annual Cost (Fixed) Product Fixed $10,000 $300 x 12 designs Artist - contract Artist - design fee Product Fixed $3,600 Computer/Printer Product Fixed $5,400 Computer/Printer Period Fixed $600 One-time startup costs - not included in annual expenses One-time startup costs - not included in annual expenses $5400 less residual value (50) / 3 yrs $1800 3 = $ $600 less residual value (SC)/3 years = $200 $4500 less residual value (SO) / 3 years $1500 = Depreciation - Computer/Printer Product Fixed $1,800 Depreciation - Computer/Printer Period Fixed $200 Depreciation - Heat Press Machine Product Fixed $1,500 One-time startup costs - not included in annual expenses Heat Press Machine Product Fixed $4,500 Period Fixed $3,600 $2250 per month x 12 mos Liability Insurance Mall Rent 90% Product Fixed $27,000 $250 per month x 12 mos Mall Rent 10% Period Fixed $3,000 Owners (shared) Period (S/A) Fixed $12,000 $1000 per quarter x 4 qtrs Parties Period Fixed $4,000 $125 per month x 12 mos Storage Unit Product Fixed $ $1,500 Inkjet Cartridges Product Variable $0.10 $50/500 prints - $0.10/print...1 print per shirt 1 flyer print - $0.10, print one every 5 shirts, so $0.10/5 $0.02 = , 5 1 flyer paper $0.10, print one every 5 shirts, so $0.10/5 - $0.02 , $5 $ Inkjet Cartridges Period Variable $0.02 Laser Paper Period Variable $0.02 $8.00/10 shirts $0.80 per shirt (DL $8/hr, make 10 shirts per hour) Product (Transfer) Variable $0.80 $8.00/20 shirts $0.40 per shirt (DL $8/hr, fold 20 shirts per hour) Student Workers (3) 3 Student Workers (3) 3 Period (Folding/Wrapping) Variable $0.40 T-shirts Product Variable $3.75 $400/1000 sheets $0.40/sheet...1 transfer paper per shirt Transfer Paper Product Variable $0.40 Wrapping Paper/Box / Period Variable $0.20 Fixed (a) Variable (b) $68,200 $5.69 (Artist contract Artist design fee Printer Depreciation. Heat Press Depreciation - Liability Insurance + Mall Rent (both). Owners token salary Parties - Storage Unit) (Inkjet cartridges (both) Laser Paper + Workers (both) T-shirts +Transfer Paper Wrapping Paper/Box)