need answers to questions 4,5,6 with excel files explained please

Walton Clothing, Inc. The Business Situation After graduating with a degree in business from Eastern University in Campus Town, USA, David Horton realized that he wanted to remain in Campus Town. After a number of unsuccessful attempts at getting a job in his discipline, David decided to go into business for himself. In thinking about his business venture, David determined that he had four criteria for the new business: 1. He wanted to do something that he would enjoy. 2. He wanted a business that would give back to the community. 3. He wanted a business that would grow and be more successful every year. 4. Realizing that he was going to have to work very hard, David wanted a business that would generate a minimum net income of $25,000 annually. While reflecting on the criteria he had outlined, David, who had been president of his fraternity and served as an officer in several other student organizations, realized that there was no place in Campus Town to have custom sweatshirts made using a silk-screen process. When student organizations wanted sweatshirts for their members or to market on campus, the officers had to make a trip to a city 100 miles away to visit "Shirts and More." David had worked as a part-time employee at Shirts and More while he was in high school and had envisioned owning such a shop. He realized that a sweatshirt shop in Campus Town had the potential to meet all four of his criteria. David set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Because Jayne liked David and was intrigued by his entrepreneurial spirit, she answered many of David's questions. In addition, Jayne provided information concerning the type of equipment David would need for his business and its average useful life. Jayne knows a competitor who is retiring and would like to sell his equipment David can purchase the equipment at the beginning of 2013, and the owner is willing to give him terms of 50% due upon purchase and 50% due the quarter following the purchase David decided to purchase the following equipment as of January 1, 2013 Cost Useful Life Hand-operated press that applies $7.5005 yos. ink to the shirt Light-exposure table 1,350 10yrs. Deyer conveyor belt that makes 2.500 10 yrs. ink dry on the shirts Computer with graphics 3.500 4 yos. software and color printer Display furniture 2,000 10 yrs Used cash register 5005 yrs. David has decided to use the sweatshirt supplier recommended by Jayne. He learned that a gross of good-quality sweatshirts to be silk- screened would cost $1,440. Jayne has encouraged David to ask the sweatshirt supplier for terms of 40% of a quarter's purchases to be paid in the quarter of purchase, with the remaining 60% of the quarter's purchases to be paid in the quarter following the purchase. David also learned from talking with Jayne that the ink used in the silkscreen process costs approximately 0.75 per shirt. Knowing that the silk-screen process is somewhat labor- intensive, David plans to hire six college students to help with the process. Each one will work an average of 20 hours per week for 50 weeks during the year. David estimates total annual wages for the workers to be $72,000. In addition, David will need one person to take orders, bill customers, and operate the cash register. Cary Sue Smith, who is currently Director of Student Development at Eastern University, has approached David about a job in sales. Cary Sue knows the officers of all of the student organizations on campus. In addition, she is very active in the community. David thinks Cary Sue can bring in a lot of business. In addition she also has the clerical skills needed for the position. Because of her contacts, David is willing to pay Cary Sue $1,200 per month plus a commission of 10% of sales. David estimates Cary Sue will spend 50% of the workday focusing on sales, and the remaining 50% will be spent on clerical and administrative duties. David realizes that he will have difficulty finding a person skilled in computer graphics to generate the designs to be printed on the shirts. Jayne recently hired a graphics designer in that position for Shirts and More at a rate of $500 per month plus $0.10 for each shirt printed. David believes he can find a university graphics design student to work for the same rate Jayne is paying her designer David was fortunate to find a commercial building for rent near the university and the downtown area. The landlord requires a one-year lease. Although the monthly rent of $1,000 is more than David had anticipated paying, the building is nice, has adequate parking, and there is room for expansion. David anticipates that 75% of the building will be used in the silk- screen process and 25% will be used for sales. David's fraternity brothers have encouraged him to advertise weekly in the Eastern University student newspaper. Upon inquiring, David found that a 303 30 ad would cost $25 per week. David also plans to run a weekly ad in the local newspaper that will cost him $75 per week. David wants to sell a large number of quality shirts at a reasonable price He estimates the selling price of each customized shirt to be $16. Jayne has suggested that he should ask customers to pay for 70% of their purchases in the quarter purchased and pay the additional 30% in the quarter following the purchases. After talking with the insurance agent and the property valuation administrator in his municipality, David estimates that the property taxes and insurance on the machinery will cost $2,240 annually; property tax and insurance on display furniture and cash register will total $380 annually. Jayne reminded David that maintenance of the machines is required for the silk-screen process. In addition, David realizes that he must consider the cost of utilities. The building David wants to rent is roughly the same size as the building occupied by Shirts and More. In addition, Shirts and More sells approximately the same number of shirts David plans to sell in his store. Therefore, David is confident that the maintenance and utility costs for his shop will be comparable to the maintenance and utility costs for Shirts and More, which are as follows within the relevant range of zero to 8,000 shirts. Shirts Sold Maintenance Costs Utility Costs January 2.000 $1,716 $1,100 February 2.110 March 2.630 April 3.150 May 5.000 June 5.300 July 3.920 August 2.080 September 8.000 October 6,810 November 6,000 December 3.000 1.720 1,740 1.740 1.758 1.818 1.25 1.780 1,171 1.198 1.268 1.274 1.205 1.117 1.860 1.835 1.749 1,347 1.193 David estimates the number of shirts to be sold in the first five quarters, beginning January 2013, to be: First quarter year 8,000 Second quarter year I 10,000 Third quarter, year 20,000 Fourth quarter year 1 12,000 First quarter year 2 18.000 David decides to establish his company as a corporation He will Seeing how determined his son was to become an entrepreneur, David's father offered to co-sign a note for an amount up to $20,000 to help David open his sweatshirt shop, Walton Clothing, Inc. However, when David and his father approached the loan officer at First Guarantee Bank, the loan officer asked David to produce the following budgets for 2013. Sales budget Schedule of expected collections from customers Shirt purchases budget Schedule of expected payments for purchases Silk-screen labor budget Selling and administrative expenses budget Silk-screen overhead expenses budget Budgeted income statement Cash budget Budgeted balance sheet The loan officer advised David that the interest rate on a 12- month loan would be 8%. David expects the loan to be taken out as of January 1, 2013. David has estimated that his income tax rate will be 20%. He expects to pay the total tax due when his returns are fi led in 2014. Instructions Answer the following questions. 1. Do you think it was important for David to stipulate his four criteria for the business (see page CA-20), including the goal of generating a net income of at least $25,000 annually? Why or why not? 2. If the company has sales of $12,000 during January of the first year of business, determine the amount of variable and fixed costs associated with utilities and maintenance using the high-low method for each. (Round unit variable costs to three decimal places where necessary.) 3. Using the format below, prepare a sales budget for the year ending 2013 4. Prepare a schedule of expected collections from customers. Walton Clothing, Inc. Schedule of Expected Collections from Customers For the Year Ending December 31, 2013 Quarter 2 3 Accounts receivable 1/1/13-0 First quarter Second quarter Third quarter Fourth quarter Total collections 5. David learned from talking with Jayne that the supplier is so focused on making quality sweatshirts that many times the shirts are not available for several days. She encouraged David to maintain an ending inventory of shirts equal to 25% of the next quarter's sales. Prepare a shirt purchases budget for shirts using the format provided. Walton Clothing, Inc. Shirt Purchases Budget For the Year Ended December 31, 2013 Quarter Year Shirts to be silk-screened Plus: Desired ending inventory Total shirts required Less: Beginning inventory Total shirts needed Cost per shirt Total cost of shirt purchases 6. Prepare a schedule of expected payments for purchases. Walton Clothing, Inc. Schedule of Expected Payments for Purchases For the Year Ended December 31, 2013 Quarter 2 Accounts payable 1/1/13-O- First quarter Second quarter Third quarter Fourth quarter Total payments Walton Clothing, Inc. The Business Situation After graduating with a degree in business from Eastern University in Campus Town, USA, David Horton realized that he wanted to remain in Campus Town. After a number of unsuccessful attempts at getting a job in his discipline, David decided to go into business for himself. In thinking about his business venture, David determined that he had four criteria for the new business: 1. He wanted to do something that he would enjoy. 2. He wanted a business that would give back to the community. 3. He wanted a business that would grow and be more successful every year. 4. Realizing that he was going to have to work very hard, David wanted a business that would generate a minimum net income of $25,000 annually. While reflecting on the criteria he had outlined, David, who had been president of his fraternity and served as an officer in several other student organizations, realized that there was no place in Campus Town to have custom sweatshirts made using a silk-screen process. When student organizations wanted sweatshirts for their members or to market on campus, the officers had to make a trip to a city 100 miles away to visit "Shirts and More." David had worked as a part-time employee at Shirts and More while he was in high school and had envisioned owning such a shop. He realized that a sweatshirt shop in Campus Town had the potential to meet all four of his criteria. David set up an appointment with Jayne Stoll, the owner of Shirts and More, to obtain information useful in getting his shop started. Because Jayne liked David and was intrigued by his entrepreneurial spirit, she answered many of David's questions. In addition, Jayne provided information concerning the type of equipment David would need for his business and its average useful life. Jayne knows a competitor who is retiring and would like to sell his equipment David can purchase the equipment at the beginning of 2013, and the owner is willing to give him terms of 50% due upon purchase and 50% due the quarter following the purchase David decided to purchase the following equipment as of January 1, 2013 Cost Useful Life Hand-operated press that applies $7.5005 yos. ink to the shirt Light-exposure table 1,350 10yrs. Deyer conveyor belt that makes 2.500 10 yrs. ink dry on the shirts Computer with graphics 3.500 4 yos. software and color printer Display furniture 2,000 10 yrs Used cash register 5005 yrs. David has decided to use the sweatshirt supplier recommended by Jayne. He learned that a gross of good-quality sweatshirts to be silk- screened would cost $1,440. Jayne has encouraged David to ask the sweatshirt supplier for terms of 40% of a quarter's purchases to be paid in the quarter of purchase, with the remaining 60% of the quarter's purchases to be paid in the quarter following the purchase. David also learned from talking with Jayne that the ink used in the silkscreen process costs approximately 0.75 per shirt. Knowing that the silk-screen process is somewhat labor- intensive, David plans to hire six college students to help with the process. Each one will work an average of 20 hours per week for 50 weeks during the year. David estimates total annual wages for the workers to be $72,000. In addition, David will need one person to take orders, bill customers, and operate the cash register. Cary Sue Smith, who is currently Director of Student Development at Eastern University, has approached David about a job in sales. Cary Sue knows the officers of all of the student organizations on campus. In addition, she is very active in the community. David thinks Cary Sue can bring in a lot of business. In addition she also has the clerical skills needed for the position. Because of her contacts, David is willing to pay Cary Sue $1,200 per month plus a commission of 10% of sales. David estimates Cary Sue will spend 50% of the workday focusing on sales, and the remaining 50% will be spent on clerical and administrative duties. David realizes that he will have difficulty finding a person skilled in computer graphics to generate the designs to be printed on the shirts. Jayne recently hired a graphics designer in that position for Shirts and More at a rate of $500 per month plus $0.10 for each shirt printed. David believes he can find a university graphics design student to work for the same rate Jayne is paying her designer David was fortunate to find a commercial building for rent near the university and the downtown area. The landlord requires a one-year lease. Although the monthly rent of $1,000 is more than David had anticipated paying, the building is nice, has adequate parking, and there is room for expansion. David anticipates that 75% of the building will be used in the silk- screen process and 25% will be used for sales. David's fraternity brothers have encouraged him to advertise weekly in the Eastern University student newspaper. Upon inquiring, David found that a 303 30 ad would cost $25 per week. David also plans to run a weekly ad in the local newspaper that will cost him $75 per week. David wants to sell a large number of quality shirts at a reasonable price He estimates the selling price of each customized shirt to be $16. Jayne has suggested that he should ask customers to pay for 70% of their purchases in the quarter purchased and pay the additional 30% in the quarter following the purchases. After talking with the insurance agent and the property valuation administrator in his municipality, David estimates that the property taxes and insurance on the machinery will cost $2,240 annually; property tax and insurance on display furniture and cash register will total $380 annually. Jayne reminded David that maintenance of the machines is required for the silk-screen process. In addition, David realizes that he must consider the cost of utilities. The building David wants to rent is roughly the same size as the building occupied by Shirts and More. In addition, Shirts and More sells approximately the same number of shirts David plans to sell in his store. Therefore, David is confident that the maintenance and utility costs for his shop will be comparable to the maintenance and utility costs for Shirts and More, which are as follows within the relevant range of zero to 8,000 shirts. Shirts Sold Maintenance Costs Utility Costs January 2.000 $1,716 $1,100 February 2.110 March 2.630 April 3.150 May 5.000 June 5.300 July 3.920 August 2.080 September 8.000 October 6,810 November 6,000 December 3.000 1.720 1,740 1.740 1.758 1.818 1.25 1.780 1,171 1.198 1.268 1.274 1.205 1.117 1.860 1.835 1.749 1,347 1.193 David estimates the number of shirts to be sold in the first five quarters, beginning January 2013, to be: First quarter year 8,000 Second quarter year I 10,000 Third quarter, year 20,000 Fourth quarter year 1 12,000 First quarter year 2 18.000 David decides to establish his company as a corporation He will Seeing how determined his son was to become an entrepreneur, David's father offered to co-sign a note for an amount up to $20,000 to help David open his sweatshirt shop, Walton Clothing, Inc. However, when David and his father approached the loan officer at First Guarantee Bank, the loan officer asked David to produce the following budgets for 2013. Sales budget Schedule of expected collections from customers Shirt purchases budget Schedule of expected payments for purchases Silk-screen labor budget Selling and administrative expenses budget Silk-screen overhead expenses budget Budgeted income statement Cash budget Budgeted balance sheet The loan officer advised David that the interest rate on a 12- month loan would be 8%. David expects the loan to be taken out as of January 1, 2013. David has estimated that his income tax rate will be 20%. He expects to pay the total tax due when his returns are fi led in 2014. Instructions Answer the following questions. 1. Do you think it was important for David to stipulate his four criteria for the business (see page CA-20), including the goal of generating a net income of at least $25,000 annually? Why or why not? 2. If the company has sales of $12,000 during January of the first year of business, determine the amount of variable and fixed costs associated with utilities and maintenance using the high-low method for each. (Round unit variable costs to three decimal places where necessary.) 3. Using the format below, prepare a sales budget for the year ending 2013 4. Prepare a schedule of expected collections from customers. Walton Clothing, Inc. Schedule of Expected Collections from Customers For the Year Ending December 31, 2013 Quarter 2 3 Accounts receivable 1/1/13-0 First quarter Second quarter Third quarter Fourth quarter Total collections 5. David learned from talking with Jayne that the supplier is so focused on making quality sweatshirts that many times the shirts are not available for several days. She encouraged David to maintain an ending inventory of shirts equal to 25% of the next quarter's sales. Prepare a shirt purchases budget for shirts using the format provided. Walton Clothing, Inc. Shirt Purchases Budget For the Year Ended December 31, 2013 Quarter Year Shirts to be silk-screened Plus: Desired ending inventory Total shirts required Less: Beginning inventory Total shirts needed Cost per shirt Total cost of shirt purchases 6. Prepare a schedule of expected payments for purchases. Walton Clothing, Inc. Schedule of Expected Payments for Purchases For the Year Ended December 31, 2013 Quarter 2 Accounts payable 1/1/13-O- First quarter Second quarter Third quarter Fourth quarter Total payments