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2. Calculate the total amount of cash you will need to have before opening your business, in order to buy all necessary equipment and machines, to purchase all materials and supplies needed for the first three months of operations, and to pay your employees first three months wages. Assume that your parents have agreed to loan you this amount and only charge you 5% interest each year. The following information regarding cash payment needs for your variable and fixed costs are below:
   1. Variable costs: For every variable cost item, you decide to buy sufficient quantity for making the first 2,000 t-shirts. You also want to prepare sufficient amount of cash to pay for the labor costs needed for making the first 2,000 t-shirts. Assume you can pay your workers for a fraction of an hour but you cannot purchase a fraction of an ink-jet cartridge or a partial case/ream of paper.
   2. Fixed costs: Your initial amount of cash should be sufficient to pay for the first quarters cash needs for your fixed costs. For your fixed cost items, payments will be made according to below:
      1. Rent to the mall will be paid monthly
      2. Full payment to the artist, full payment for the computer and printer, and full payment for heat press machine will need to be made before you open for business.
      3. You will not pay yourself until the end of the first year of operations.
3. Prepare a cash budget for your company for the first year of operations. Assume that the selling price is $15/t-shirt and that 7,800 t-shirts will be made and sold in the first year. Assume all sales are cash sales and that all costs are paid in cash. Your cash balance on January 1 is the amount you are borrowing from your parents (amount calculated in step 1 above). Remember when calculating your manufacturing and selling & administrative expenses, that monthly depreciation on your equipment (i.e. computer & printer and heating press) is not a cash payment. You decide to keep a cash balance of $5,000 at the end of the year. You will use the extra cash to back the loan from your parents including the interest that is owed.
4. Based on the estimated sales level of 7,800 t-shirts for the first year, prepare your companys budgeted income statement for the first year of operations. Remember when calculating your cost of goods sold and selling & administrative amounts, that monthly depreciation on your equipment (i.e. computer & printer and heating press) is an expense to the company.

The template...

2 1.Your Company Name: 3 4 2. and 3. Detailed list and classification of costs 5 Fease show or eyplain wour comptations in a readabletnderstandable foma opoints be gtn Wno avplanations ane proswieu 6 7 8 Variable Costs and Expenses 9 Round ournumnbers to the hundeh 4. Calculate contribution Margin, break-even, target profit Cost Per T-Shirt Cost Items 10 Non-Manufacturing (1) laser paper Explanations Cost Items Cost Per T-Shirt 11 $20/ream; 200 sheets in a ream 12 Manufacturing 0.02 a) Contribution margin per t-shirt = Explanations $9.91 (1) t-shirts T-shirts 3.75 13 Explanations $15 selling price- $5.09 variable costs per shirt $9.91 $201200 sheets 0.10; printed for every 5 shirts sold: $0.1015 shirts 0.02 14 sellingt-shirts which cost $3.75 each to purchase 15 (2) ink oartridge ink cartridge cost $50; makes 500 prints 0.02 16. Explanations (2) transfer paper 1000 sheets per case; 1sheet per shirt 497 shirts 0.40 b) Break-even of t-shirts per month 17 18Eplanaions Explanations $501500 prints 0.10 ; printed for every 5 shirts sold; $0.105 shirts 0.02 Total fixed costs $4925 contribution margin $9.91- 497 $400 per case 1000 sheets= 0.40 19 Total Variable Non-Manufacturing costs per T-shirt: 0.04 20 cof t-shirts needed to earn $1,000 profit 21 (3) printing costs 22 Eplanations ink cartridge cost $50; makes 500 prints 598 shirts 0.10 per month Explanations Total Variable costs per T-shirt: 5.09 $501500 prints 0.10 Fixed costs$4925+$1000 profit contribution margin 9.91= 598 23 24 25 (4) employee wages 26 Eplanaions 3 employees at $8/hour: 10 shirts an hour 0.80 $8/10 shirts 0.80 Cost Items Cost Per Month 27 Non-Manufacturing 28 Total Variable Manufacturing cost per T-Shirt: 5.05 (1) Mall Rent $2500lmonth: 10:% selling & admin 250 29 Explanations 30 Fixed Costs and Expenses ndwrnumbers to the neanest ahole dola $2500x0.10 $250 31 32 (2) Computer & Pri $6000; last 3 years; 10% selling & admi Explanations Cost Per Month Cost Items 16.67 33 34 Manufacturing 35 (1 artist fee 36 Eplanatons $6000 3 years = $ 2000 $2000/12 months 166.67 10%= 16.67 $10,000 for 12 designs 833.33 (3) Owner's Salary 12,000lyear $10,000 12 months $833.33 1000 37 Explanations 38 $2500/month; 90 % operations $12,000 12 months $1000 39 (2) Mall rent 2250 40 Eplanaions $2500 x0.90$2250 $3600lyear (4) Insurance 300 41 Explanations 42 43 (3) Heat press $4500: last 3 years 125 $3600 12 months $300 44 Explanabions Total Fixed Non-Manufacturing costs per year $4500 3 years = $1500$1500 12 months $125 1566,7 45 46 47 (4) Computer & Printer Explanations $6000; last 3 years; 90% operations 150 Total Fixed Costs Per Month: 4925 48 $6000 3 years= $2000 $ 2000 /12 months 166.6790%= 150 49 50 Total Fixed Manufacturing cost per year 3358.3 51 co. C G H J O Q 1 Business Simulation Project - Phase Two 2 3 Your Company Name: a) cash needed for fixed costs during 1st quarter 2. Cash budget for the first year 4 3. Prepare a Budgeted Income Statement 1. Calculate amount of cash you need to borrow from your parents 5 6 a) cash needed for variable costs of $2,000 shirts Revenue from Sales Cash Needed Cash balance, January 1, 2020 Collections from customers Cost of Goods Sold Cash needed 7 Total cash available before payments Gross Profit Mall rent 8 9 Direct materials (t-shirts) 10 Explanation/calculation: Selling & Admin Expenses Income from Operations Less Payments: Explanation/calculation: Manufacturing Costs Other Expenses: |(Manufacturing & Non-manufacturing costs) Selling & Administrative Expenses 11 Interest Expense Capital Expenditures 12 Artist Fee 13 Labor costs Explanation/calculation: Income before income tax Total Payments 14 Explanation/calculation: Income tax expense** Excess of cash Net Income 15 Financing: Repayment of loan from parents 16 Computer & Printer 17 Transfer Paper *Assume a federal tax rate of 21% and a state tax rate of 7% (Manufacturing & Non-manufacturing costs) Cash balance, December 31, 2020 18 Explanation/calculation: Explanation/calculation: 19 20 Heat press machine 21 Ink-jet Cartridges 22 (Manufacturing & Non-manufacturing costs) 23 Explanation/calculation: Explanation/calculation: Liability Insurance 24 25 Laser Paper Explanation/calculation 26 Explanation/calculation: 27 Total cash needed for fixed costs 28 29 Total cash needed for variable costs Total cash borrowed from parents 30 31 32 2 1.Your Company Name: 3 4 2. and 3. Detailed list and classification of costs 5 Fease show or eyplain wour comptations in a readabletnderstandable foma opoints be gtn Wno avplanations ane proswieu 6 7 8 Variable Costs and Expenses 9 Round ournumnbers to the hundeh 4. Calculate contribution Margin, break-even, target profit Cost Per T-Shirt Cost Items 10 Non-Manufacturing (1) laser paper Explanations Cost Items Cost Per T-Shirt 11 $20/ream; 200 sheets in a ream 12 Manufacturing 0.02 a) Contribution margin per t-shirt = Explanations $9.91 (1) t-shirts T-shirts 3.75 13 Explanations $15 selling price- $5.09 variable costs per shirt $9.91 $201200 sheets 0.10; printed for every 5 shirts sold: $0.1015 shirts 0.02 14 sellingt-shirts which cost $3.75 each to purchase 15 (2) ink oartridge ink cartridge cost $50; makes 500 prints 0.02 16. Explanations (2) transfer paper 1000 sheets per case; 1sheet per shirt 497 shirts 0.40 b) Break-even of t-shirts per month 17 18Eplanaions Explanations $501500 prints 0.10 ; printed for every 5 shirts sold; $0.105 shirts 0.02 Total fixed costs $4925 contribution margin $9.91- 497 $400 per case 1000 sheets= 0.40 19 Total Variable Non-Manufacturing costs per T-shirt: 0.04 20 cof t-shirts needed to earn $1,000 profit 21 (3) printing costs 22 Eplanations ink cartridge cost $50; makes 500 prints 598 shirts 0.10 per month Explanations Total Variable costs per T-shirt: 5.09 $501500 prints 0.10 Fixed costs$4925+$1000 profit contribution margin 9.91= 598 23 24 25 (4) employee wages 26 Eplanaions 3 employees at $8/hour: 10 shirts an hour 0.80 $8/10 shirts 0.80 Cost Items Cost Per Month 27 Non-Manufacturing 28 Total Variable Manufacturing cost per T-Shirt: 5.05 (1) Mall Rent $2500lmonth: 10:% selling & admin 250 29 Explanations 30 Fixed Costs and Expenses ndwrnumbers to the neanest ahole dola $2500x0.10 $250 31 32 (2) Computer & Pri $6000; last 3 years; 10% selling & admi Explanations Cost Per Month Cost Items 16.67 33 34 Manufacturing 35 (1 artist fee 36 Eplanatons $6000 3 years = $ 2000 $2000/12 months 166.67 10%= 16.67 $10,000 for 12 designs 833.33 (3) Owner's Salary 12,000lyear $10,000 12 months $833.33 1000 37 Explanations 38 $2500/month; 90 % operations $12,000 12 months $1000 39 (2) Mall rent 2250 40 Eplanaions $2500 x0.90$2250 $3600lyear (4) Insurance 300 41 Explanations 42 43 (3) Heat press $4500: last 3 years 125 $3600 12 months $300 44 Explanabions Total Fixed Non-Manufacturing costs per year $4500 3 years = $1500$1500 12 months $125 1566,7 45 46 47 (4) Computer & Printer Explanations $6000; last 3 years; 90% operations 150 Total Fixed Costs Per Month: 4925 48 $6000 3 years= $2000 $ 2000 /12 months 166.6790%= 150 49 50 Total Fixed Manufacturing cost per year 3358.3 51 co. C G H J O Q 1 Business Simulation Project - Phase Two 2 3 Your Company Name: a) cash needed for fixed costs during 1st quarter 2. Cash budget for the first year 4 3. Prepare a Budgeted Income Statement 1. Calculate amount of cash you need to borrow from your parents 5 6 a) cash needed for variable costs of $2,000 shirts Revenue from Sales Cash Needed Cash balance, January 1, 2020 Collections from customers Cost of Goods Sold Cash needed 7 Total cash available before payments Gross Profit Mall rent 8 9 Direct materials (t-shirts) 10 Explanation/calculation: Selling & Admin Expenses Income from Operations Less Payments: Explanation/calculation: Manufacturing Costs Other Expenses: |(Manufacturing & Non-manufacturing costs) Selling & Administrative Expenses 11 Interest Expense Capital Expenditures 12 Artist Fee 13 Labor costs Explanation/calculation: Income before income tax Total Payments 14 Explanation/calculation: Income tax expense** Excess of cash Net Income 15 Financing: Repayment of loan from parents 16 Computer & Printer 17 Transfer Paper *Assume a federal tax rate of 21% and a state tax rate of 7% (Manufacturing & Non-manufacturing costs) Cash balance, December 31, 2020 18 Explanation/calculation: Explanation/calculation: 19 20 Heat press machine 21 Ink-jet Cartridges 22 (Manufacturing & Non-manufacturing costs) 23 Explanation/calculation: Explanation/calculation: Liability Insurance 24 25 Laser Paper Explanation/calculation 26 Explanation/calculation: 27 Total cash needed for fixed costs 28 29 Total cash needed for variable costs Total cash borrowed from parents 30 31 32