. Prepare a sales budget including a column for each year and a column for the total. The budgets should also include a schedule of expected cash collection, by year and in total. Make your assumptions about the type of sales (cash versus credit) and your credit terms clear.

2. Make reasonable assumptions about the safety stock and prepare the production budgets for each of the upcoming five years. You may need to estimate unit sales for the 6th year for this budget.

3. Prepare the direct material budgets for the upcoming five years. The budgets should also include a schedule of expected cash disbursements for purchase of materials, by year and in total. Make your assumptions about the safety stock of materials and the timing of payments clear.

4. Prepare a direct labor budget for each of the upcoming five years.

5. Prepare a manufacturing overhead budget for each of the upcoming five years.

6. Prepare a selling and administrative expense budget for each of the upcoming five years.

7. Prepare a cash budget for each of the upcoming five years. This budget should include the cash receipts section, the cash disbursement section, the cash excess or deficiency section, and the financing section. Make your assumptions about the financing policy clear.

8. Prepare a budgeted income statement for each of the upcoming five years that reflects the budgets you prepared earlier.

9. Prepare a budgeted balance sheet for each of the upcoming five years that reflects the budgets you prepared earlier.

1. Make projections of your sales in units and the price you will sell your product for over each of the upcoming five years.

For the first year we project to sell 500 shirts. In the following year we project 750 units sold. For the next three years our projections are 1000, 1250, and 1500 units sold. We will sell the shirts for $20 a piece

2. Make a detailed list of all the materials needed to make your product including quantities needed of each material and the cost of the material on a per-unit basis.

Ink - 1 pint per 60 shirts ($20/pint)

Athletic shirts - roughly $3 each shirt

3. Make a list of all the equipment you will need to make your product. Estimate the cost of each piece of equipment that you will need.

Screen Printing kits - $800 (for a 4 piece)

4. Make a list of all other expenses that would be needed to make and sell your product for each of the upcoming five years. For example, labor, rent, utilities, insurance

Materials

Rent- 100 a month

Utilities- 50 a month

Insurance- 25 a month

Storage- 25 a month

Advertising-50 a month

5. Classify all of the expenses you have listed as being either manufacturing costs or nonmanufacturing costs. For manufacturing costs, classify them into: direct materials, direct labor, and manufacturing overhead.

Manufacturing costs: Materials (direct materials), utilities (manufacturing overhead), insurance (manufacturing overhead), rent (manufacturing overhead), storage (manufacturing overhead)

Nonmanufacturing costs: Advertising

6. Classify all of the expenses you have listed as being either fixed or variable. For mixed expenses, separate the expense into the fixed component and the variable component.

Fixed costs: Rent, Utilities, Storage, Insurance, advertisement

Variable cost: Materials - the price of the shirts would be a fixed component, while the number of shirts we order may vary so that would be the variable component.

7. Calculate how many units of your product you will need to see to break even in each of the five years you have projected.

Every 60 shirts we will have to spend $20 on ink and $180 on the shirts themselves. To make 500 Units in the first year we would be spending about $1,666 on materials. If you add the $800 for the printing kit that puts us at about $2,466 spent on materials. Then you add the fixed expenses that we estimate to be about $3,000 a year total you get $5,466. Selling the shirts for $20 a piece we would have to sell 274 shirts in order to break even. For the second year wed have to sell 234. After the second year wed essentially have the same break even point for the next years because our clothes are made in batches therefore the price would stay roughly the same each year.

8. Calculate the margin of safety in units for each of the five years in your projection.

Expected profit - break even/ profit = MOS

$10,000 - $5,466/ $10,000 = 45.34%

For our first year wed have a safety margin of 45.34%. For years two through five we would have a safety margin of 53.34%.

9. Decide how much you would like to make in before-tax operating income (target profit) in each of the upcoming five years. Calculate how many units you would need to sell in each of the upcoming years to meet those target profit levels.

In our first year we would like to make at least $2000 in before-tax operating income. We would have to sell 374 shirts. We calculated this by adding $2000 to our break even price and dividing that by $20 a shirt. For the second year we would have to sell 334 shirts. This is the same for years three four and five.