How Business Create Value You are considering opening a shop in a nearby mall th

Question

How Business Create Value You are considering opening a shop in a nearby mall that willsell specilaty T-shirts. T-shirts, containing designs and wordsselected by customers, will be produced for customers on order. Youwill need to borrow $25,000 to begin operations. A local bank hasagreed to consider a loan and has asked for a summary plan todemonstate the performance you expect from your company and yourability to repay the loan. You will pay $5.50 for T-shirts and willsell them for $8. The cost of paint and supplies will be .50 pershirt. An examination of similar stores at other malls indicatesthat you should be able to sell an average of 1,000 shirts permonth. Rent for your store will be $300 per month. Utilities willbe $150 per month, on average. Wages will be $800 per month. Calculate the expected profit of your company for the firstyear of operation. Explain how a bank loan officer may use your profitprojections to help make the lending decisions. How Business Create Value You are considering opening a shop in a nearby mall that willsell specilaty T-shirts. T-shirts, containing designs and wordsselected by customers, will be produced for customers on order. Youwill need to borrow $25,000 to begin operations. A local bank hasagreed to consider a loan and has asked for a summary plan todemonstate the performance you expect from your company and yourability to repay the loan. You will pay $5.50 for T-shirts and willsell them for $8. The cost of paint and supplies will be .50 pershirt. An examination of similar stores at other malls indicatesthat you should be able to sell an average of 1,000 shirts permonth. Rent for your store will be $300 per month. Utilities willbe $150 per month, on average. Wages will be $800 per month. Calculate the expected profit of your company for the firstyear of operation. Explain how a bank loan officer may use your profitprojections to help make the lending decisions.

Explanation / Answer

1 .IN ORDER TO EVALUATE THE GIVEN PROJECT, SEGRAGATE THECOSTS INTO:

·        Fixed

·         Variable

2. Calculate the Unit Contribution .

Fixed Costs permonth

Fixed Costs permonth

Rent 300.00 Utilities 150.00 Wages 800.00 1,250.00 Variable Costs Purchase Price 5.50 Cost of paints & supplies 0.50 6.00 Selling Price 8.00 UnitContribution 2.00 Number of T-shirts sold permonth 1,000.00 Monthly Contribution fromsales 2* 1000 2,000.00 Annual Contributions 2000 *12 24,000.00 less : Annual Fixed Costs 1250 * 12 15,000.00 Annual Projected Profits 9,000.00 Return oninvestment 9000 /25000 36.00%

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.