After Victoria arrived at Maria's house, they both started enthusiastically preparing the document that they should present to a major investment fund in Madrid early next month. The idea was simple: Mara would design a first Spring-Summer line of short-sleeved T-shirts and polo shirts in high-quality cotton that they would start selling by internet early March next year. These shirts would be available in their web site until the end of September when they would replace Spring-Summer collection with another one of Autumn-Winter garments for your people. Each one contributed with ?1,500 and founded Tropical Fruit Fashion S.L. which was registered as their brand too. Notary fees and registration amounted to ?400 paid with the paid-in capital. The investment fund to which they presented the project had required an income statement for the first 12 months of activity as well as initial investment needs and, where appropriate, financing needs of operations.

2.1. The product

Both had agreed to launch a collection of T-shirts with 20 different designs and 10 short sleeved polo shirts designed for women. Each design would be available in S, M, L and XL sizes. Based on the artisanal productions and sales they had made to friends and acquaintances, they thought they could sell up to 1,500 units of each T-shirt design and 500 of each polo design. Anyway, they were not clear how many units to produce in each size.

2.2. Purchase and procurement.

The family of Manuel Morrio, who is an old friend of Victoria, owns a small textile factory that works for a well-known Galician company in the sector. Manuel quoted them the following prices: T-shirts ?8/unit, and polos ?12/unit, including transportation and delivery at Tropical Fruit Fashion facilities. Manuel needed 3 weeks to produce the samples and, approximately, 6 weeks to schedule production and serve the complete order since he could not deliver partial orders because of the complexity that it entailed. Maria estimated between 2 and 3 weeks to design prototypes. In addition to the option of manufacturing the garments in Manuels factory, Mara and Victoria are considering sourcing from other countries to lower production costs. Searching on the internet and after reviewing a multitude of forums, the following additional alternatives to production in Galicia are proposed:

a) Manufacture in Morocco

b) Manufacture in India.

c) Manufacture in China.

To estimate transport costs, they found a couple of websites where they could get prices: www.icontainers.com and www.searates.com. On these websites, they would also find detailed information on the types of maritime containers that could be used. They decided to analyze suppliers located in Casablanca, Mumbai and Shenzhen. After several consultations, they concluded that the TARIC code for cotton textile products is 6109100010 for polo shirts and 6109100090 for T-shirts. Both codes have fixed duties of 12% for imports from third countries. Similarly, after searching for suppliers in the above-mentioned countries, they concluded that the average ex-works prices per garment in euros would be:

SHIRT POLO

MOROCCO 4,50 5,50

INDIA 2,50 3,25

CHINA 3,00 3,80

Asian suppliers offer a period of two weeks to produce the samples (to be sent by air express delivery) and 3 weeks to for the whole production of the campaign as of the approval of the samples. The Moroccan supplier needs four weeks including sample production and manufacturing. ON top of these timings, we must be added the transport time from the country of origin to Vigo where they were looking for a warehouse to store and manage the products. With all this information, Victoria and Mara should decide where to manufacture their t-shirts and polos.

2.3. The website

Both were aware that the design of the web was a key aspect of the business and asked for help from Lus Garca, architect, childhood friend, who had achieved local relevance for his daring and transgressive interior designs. The three of them designed several sketches that they discussed with a well-known owner of a small web design company who budgeted ?5,000 for the design and implementation of the e-commerce site plus ?200/month for web hosting and maintenance. Web designers, SL, that was the name of the company, needed at least 4 weeks to have the page ready. At the very beginning, Maria and Victoria did not consider more investments in ERP, WMS or CRM software.

2.4. Marketing.

Neither Maria nor Victoria were experts in on-line marketing, so they were planning to hire an intern with a monthly cost of ?600 together with an expenditure of ?1000/month in Marketing, AdWords and Facebook mainly. The fellow should be incorporated from the very first day keeping in mind that they would need about 3 weeks to select the candidate among the last graduates of the university with specialized studies in marketing.

2.5. Sales.

As already mentioned, they estimate that they could sell up to 1,500 units of each shirt model and 500 of each type of polo between March and September. The estimated monthly distribution of sales is shown in Table 1 (see annex 1). The autumn/winter season will begin with a line of items which will be defined in a later phase. Sales will start at the end of September and will last until the end of March. Mara and Victoria prefer to evaluate how initial sales of spring/summer season would perform to define items and sales objectives for the next fall/winter season. 6% of gross sales in value is commonly accepted as customers returns in retail. Mara and Victoria decided to maintain this ratio when calculating the net revenue. Both entrepreneurs devoted many hours to analyzing websites selling similar items. They concluded that the shirts with similar design and quality were sold between 20 and 35 euros (VAT included) per unit. The analysis showed that the price of polos was between 35 and 50 euros per unit, too. What price should they use? On the other hand, Victorias educated guess was that pricing shirts and polo above 30 and 45 euros respectively, could reduce sales between 10% and 15%. They estimated that they would sell 85% of the shirts and 90% of the polos they had produced despite units/size they had defined.

2.6. Payments gateway.

With regards to the payment gateway, Victoria compared the proposals she received from several banks. After analyzing prices and services, she decided on the VPOS1 terminal of a well-known bank in the e-commerce world for good rates and the ease of integration. Rates of the bank were 0.35% of the amount of each transaction, both for national and international credit and debit cards, and a maintenance fee of ?15/month. Also, they would not have to pay additional amounts in charge backs, disputes or recovery requests. They also integrated PayPal, a very popular payment method in Spain due to the protection it offers the buyer. PayPal rates were: ? 0.35 per transaction plus 2.5% on the transaction amount. They estimate that PayPal payments would be between 20% and 30% of sales.

2.7. The warehouse.

It was now time to organize the logistics infrastructure and flows of the company. Both planned to rent a warehouse located in an industrial area on the outskirts of Vigo with a 15m faade, 20m deep and 6m free height. The warehouse had a 4m wide gate at ground level and a 25m2 small office. See Annex 2. The building already had the Activity License issued by the City Hall. The previous tenant left several picking shelves and shelves for pallets storage, also. Picking shelves are aligned in 10 rows. Each row is 10 meters long and includes 10 modules 1m wide and 40cm deep each, with 5 shelves/module. The picking shelves are 2m high. The palletized shelves, designed to store Euro pallets (80x120cm), measured 18.9m long and 1m wide with three heights. It had 7 storage modules, 2.70m long each. Each module stores 3 pallets per height, 9 pallets in total. Victoria and Maria estimated that each folded garment measured, on average, 27cm wide and 35cm long. Thus, they could place 3 stacks with 10 units/stack on each shelf. Manuel informed them that the shirts would be delivered in board boxes with 80 units/box whereas the polos would be delivered in boxes with 40 units/box. In both cases, a full pallet included 18 boxes (6 boxes/layer and 3 layers/pallet). Would they have enough room in the warehouse? The landlord asked for a rental contract of at least 12 months with an initial deposit of 2 months. The rent of the building was ?800/month (VAT excl.). According to the owner, the electricity, water and cleaning supplies could cost around ?200/month. They were planning to buy two hand pallet trucks, ?250 each, that should be available at the beginning of February. They also planned to purchase a second-hand electric forklift for ? 5,500 but they were not sure. Would they? Besides, they needed to buy two workstations for the reception and packing areas at ? 100/unit, two computers, one for each workstation, and a small label printer for ? 250. In the beginning, they would print the delivery notes in the office printer. On the other hand, they planned to buy functional furniture for the warehouse office in a well-known Nordic furniture shop: 2 tables with 2 wheelchairs, 2 chairs and a filing cabinet for a total amount of ? 300, two desktop computers with a unit cost of ? 600 and a printer for delivery notes in A4 size for ? 200. Finally, they hired a fiber line with enough data transfer capacity and a cost of ? 75/month that should be ready on January 1st. Purchases of furniture and computer equipment would be paid in cash. They should make small repairs and upgrades budgeted at ? 1,200 during January that would also be cash paid.

2.8. Outbound transportation.

Data published by different internet sources were quite homogeneous in terms of customer orders size: around two units per order. With this assumption, their estimation for the summer season shipments was that 90% would weigh less than 2 kg, 8% between 2 and 5 kg and only 2% between 5 and 10 kg. On the contrary, autumn-winter season shipments would be somewhat heavier, 40% would be below 2 kg, 35% would be between 2 and 5 kg and another 25% between 5 and 10 kg. The best transportation rates they got offered were a flat rate based on the real weight of shipments to the Peninsula (mainland) and the Balearic Islands. See table 2 in Annex 1. Shipments to the Balearic Islands will be 10% of total shipments. They will pay for a 25% tariff increase vs. mainland shipments. Transportation costs of customers returns will get the same price scheme. Also, they got a connection to the carrier webpage to print the transport label without any additional cost. To reduce costs, Mara and Victoria planned to use plastic bags to pack goods instead of board boxes. The carrier will provide plastic bags for free. In order not to penalize distribution costs, they decided that orders below ?30 will be charged with a shipping cost of ?2.50/shipment (VAT included). Orders over ?30 will not be charged with shipping costs.

2.9. Operations and the warehouse team.

Victoria and Maria will need at least one person in the warehouse's office. They asked for advice to some entrepreneurs and concluded that, at least during the first year, the management of the warehouse would be completely manual. Productivity could be around 200 units/hour in the inbound area and 20 orders/hour in the order picking and packing processes. Considering breaks and stops, calculations were made with 7 net working hours per person and day. The company cost of a warehouse worker without experience is ?1,200/month. An administration clerk ?1,400/month. How many people should they hire throughout the year to ensure the successful management of spring-summer collection? Use 22 working days/month.

QUESTIONS:

1. They should calculate the landed costs of foreign suppliers and compare them with those offered by Manuel. Decide where to manufacture and justify it.

2. How much money should they spend before starting the project? Detail investments and expenses.

3. What would be the distribution costs of the campaign? Include the costs of reverse logistics.

4. What will be the Profit & Loss account for the first campaign? Consider all other operational expenses such as payment gateway, personnel, marketing, rental and supply, server, etc.

Deferred Revenue 30,550 Current Portion Long-term Debt 5,000 Long-term Debt 50,179 Bonds Payable 50,000 Common Stock 25.000 Treasury Stock O Retained Earnings 25,000 Dividends 10,000 Revenue 200,143 Cost of Goods Sold 75,143 Salaries Expense 9,000 Rent Expense 15,000 Utilities Expense 10,000 Depreciation Expense 5.000 Interest Expense 1.000 Income Tax Expense 6,000 Additional Information: Net Income After-taxes for the Accounting Period equaled $79,000 Beginning Balance of Common Stock on 1/1/20xx $25,000 Beginning Balance of Retained Earnings on 1/1/20xx $25.090 No new stock was issued during the accounting periodOn which financial statement(s) can you find "provision for (benefit from) income taxes"? Income Statement and Statement of Stockholders' Equity O Balance Sheet and Cash Flows Statement O Cash Flow Statement and Statement of Stockholders' Equity O Income Statement O Income Statement and Balance Sheet D Question 5 15 pts On which financial statement(s) can you find "earnings per share"? Balance sheet O Income Statement Cash Flow Statement O Statement of Comprehensive Income Statement of Stockholders' Equityquestion 1 Genesis Company buys equipment for $900 machine on credit. This transaction will immediately affect the income statement only. O balance sheet only. income statement and retained earnings statement only. income statement, retained earnings statement, and balance sheet. Question Attempts: 0 of 1 usrk - 3 attempts chelle Willoughby: Attempt 1 O balance sheet Question 9 (0.2 points) A firm with a high quick ratio likely has enough current assets to satisfy its short- term obligations. True False D View hint for Question 9 Question 10 (0.2 points) Saved A company with a market-to-book ratio less than one is expected to grow it cash flow quickly. TrueQUESTION 16 . 1 POINT Which of the following statements is true about a balance sheet? Select all that apply: Assets will always equal the liabilities plus the net worth of a company. In A balance sheet will not always be in balance A balance sheet is an accounting tool that lists assets and liabilities. A balance sheet is the amount of debt owed by a firm or an individual