International Research Journal of Applied Finance ISSN 2229 6891 February 2014 Case Study Series Appendix A Full Text of Phase One Instructions Group Project-Phase One Due The purpose of this group project is to help you integrate the managerial accounting concepts we cover in class and apply them to a real world business setting. This project contains three phases. In the first phase, you will analyze your costs and come up with a cost formula for your business. In the second and the third phases, you will make sales forecast, conduct cost-volume- profit analyses, prepare budgeted financial statements, and come up with strategies to improve the profitability of your business. After you complete all phases of this project, you will have good understanding of how managerial accounting tools can help managers run a business Group Policy: This project is to be done in groups of three to five students. No individual work will be accepted. Collaboration Policy: You CANNOT discuss any portion of this project with anyone outside of your group other than the instructor for this course. Any exchange of information with anyone other than the instructor for this class, whether orally, in writing, or electronically. will be considered a violation of the academic dishonesty policy of this class. Business Description: Your project group will assume the role of young entrepreneurs to start a small company. Your company will rent a retail cart inside the Sroneridge Mall to buy plain T-shirts and imprint them with one of the twelve beautiful pictures exclusively designed for your company by a famous artist who is a friend of yours. He has agreed to design twelve super attractive T-shirt pictures for you each year at a special discount. Your target customers are teenagers and young adults who have your kind of good taste. Your business is scheduled to launch on January 1.2014. information: I) Stoneridge charges you $2,500 rent per month, which includes utilities, telephone, cleaning, and maintenance. You estimated that 90% of the rent was related to factory operations and 10% was related to selling and administrative activities. 2) You will order white, cotton t-shirts from a T-shirt wholesaler. Each T-shirt costs (including taxes, shipping, and handling) S3.75 to purchase. 3) To store T-shirts that were bought, but not yet imprinted, you will rent a storage unit. The storage unit costs you $125 per month 4) You agreed to pay your artist friend a SI0,000 annual contract fee plus a $300 design fee for each of the 12 T-shirt pictures designed. This same term is renewable for the next 3 years. Each T-shirt picture will only be used for one year. Therefore, in the second year, 12 new pictures will be designed at S300 each and another $10,000 annual contract fee will be charged 5) You will buy several items before that start of your business: lal A computer and a printer: You will pay $6,000 (including taxes, shipping and handling) to buy a computer and a printer. You expect both to last about 3 years without salvage value. You will use the straight-line method for depreciation. You estimate that about 90% of the computer and printer will be used for factory operations and 10% will be for selling and administrative activities. Ching-Lih Jan, Califo rnia Sate University, Bay, Diane Satin Robert Lin, Califomiu Sate Univer vity, East Bay