1. Prepare a selling and administrative expenses budget for Sweats Galore, Inc. for the year ended December 31, 2013.

Sweats Galore, Inc.

Selling and Administrative Expenses Budget

For the Year Ended December 31, 2013

Quarter

1 2. 3. 4 Year

Variable expenses:

Sales Commissions

Total Variable Expenses

Fixed Expenses:

Advertising

Rent

Sales Salaries

Office Salaries

Depreciation

Property taxes and insurance

Total Fixed expenses

Total selling and administrative expenses

2. Prepare a silk-screen overhead expenses budget for Sweats Galore, Inc. for the year ending December 31, 2013.

Sweats Galore, Inc.

Silk-Screen Overhead Expenses Budget

For the Year Ended December 31, 2013

Quarter

1 2. 3. 4 Year

Variable expenses:

Ink

Maintenance

Utilities

Graphic Design

Total Variable Expenses

Fixed Expenses:

Rent

Maintenance

Utilities

Graphic Design

Property taxes and insurance

Depreciation

Total Fixed expenses

Total silk-screen overhead

Direct silk-screen hours

Overhead rate per silk-screen hour

3. Using the information found in the case and previous budget, prepare a budgeted income statement for Sweats Galore, Inc. for the year ended December 31, 201

Sweats Galore, Inc.

Budgeted Income Statement

For the Year Ended December 31, 2013

Sales

Cost of goods sold

Gross profits

Selling and administrative expenses

Income from operations

Interest expense

Income before income taxes

Income tax expense

Net income

4. Using the information found in the case and the previous budget, prepare a cash budget for Sweats Galore, Inc. for the year ended December 31, 2013.

Sweats Galore, Inc.

Cash Budget

For the Year Ended December 31, 2013

Quarter

1 2. 3. 4

Beginning cash balance

Add: Receipts

Collection from customers

Total available cash

Less: Disbursements

Payments for shirt purchases

Silk-screen labor

Silk-screen overhead

Selling and administrative expenses

Payment for equipment purchases

Total disbursements

Excess (deficiency) of available cash

Over disbursements

Financing

Borrowings

Ending cash balance

5. Using information contained in the case and the previous budgets, prepare a budgeted balance sheet for Sweats Galore, Inc. for year ended December 31, 2013.

Sweats Galore, Inc.

Budgeted Balance Sheet

December 31, 2013

Assets

Cash

Accounts receivable

Sweatshirt inventory

Equipment

Less: Accumulated depreciation

Total Assets

Liabilities and Stockholders Equity

Accounts payable

Notes payable

Interest Payable

Taxes payable

Total Liabilities

Common Stock

Retained earnings

Total Stockholder equity

Total Liabilities and Stockholder Equity

6. 1. Using the information contained in the case and the previous budgets, calculate the estimated contribution margin per unit for 2013. (Hint: Silk-screened labor and the taxes are both fixed costs)
   2. Calculate the total estimated fixed cost for 2013 (including interest and taxes).
   3. Compute the break-even point in units and dollars for 2013.
7. 1. Michael is very disappointed that the company did not have an income of $25,000 for its first year of budgeted operations as he wanted. How many shirts would the company have had to sell in order to have had a profit of $25,000? (Ignore changes in income tax expense.)
   2. Why does the companys net income differ from its ending cash balance?
8. Do you think it was a good idea to offer Cary Sue a salary plus 10% of sales? Why or why not?