a Give your company an attractive name. b What and how much of your costs are va

Question

a Give your company an attractive name.
b What and how much of your costs are variable costs? List your manufacturing and
non-manufacturing variable cost items and present each of them in cost per T-shirt basis.
c What and how much of your costs are fixed costs? List your manufacturing and nonmanufacturing
fixed cost items and present each of them in total cost per year.
d Write out your yearly cost formula in Y = a + bX format. Be sure to include both
manufacturing costs and non-manufacturing costs in the cost formula.

Assume that you make and sell 7,800 t-shirts in the first year. Use your cost formula to calculate your first year’s total cost. If you sell these t-shirts at $15 each, how much
would net profit be in the first year ?

Start-up costs:

The Boulevard Mall 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.

You order white, cotton t-shirts from a T-shirt wholesaler. Each T-shirt costs (including taxes,
shipping, and handling) $3.75 to purchase.

To store T-shirts that were bought, but not yet imprinted, you rent a storage unit. The storage
unit costs you $125 per month.

You agree to pay your artist friend a $10,000 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 $300 each and another $10,000 annual contract fee will be
charged.

You buy several items before that start of your business:
[a] A computer and a printer: You 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.
[b] A heat press machine: You pay $4,500 (including taxes, shipping and handling) for a heat
press machine. The machine is used for imprinting t-shirts only and is expected to last 3
years without salvage value.
[c] Transfer paper: Each case of transfer paper costs $400 and contains 1,000 sheets of
8.5×11 transfer paper. You expect to use one transfer paper to print one T-shirt.
[d] Ink-jet cartridges: On average, each cartridge costs $50 and can make 500 prints. Each Tshirt
requires one print. You also need to print flyers, etc. for selling and administrative
purposes. For this non-manufacturing printing, you will print about one page for every 5 Tshirts
sold.
[e] Laser paper: You will buy several reams of laser paper to print promotion flyers, etc. Each
ream costs $20 and contains 200 sheets of 8.5×11 laser paper.

Wrapping paper and box: Each T-shirt costs about $0.20 to wrap and box. Wrapping and
boxing are not considered manufacturing.

You hire three fellow students as part-time workers. They not only help you operate the
machine, but also help fold, wrap and box T-shirts. Sometimes, three of them work at the same
time. But, sometimes they don’t because of their different class schedules. On average,
printing 10 shirts will take one labor hour. Folding and packaging 20 shirts also will take about
one labor hour. You pay each of your workers $8 per hour. Folding and wrapping are not considered manufacturing.

You (the owner) do all the selling and administrative work by yourself. You pay yourself a total
of $12,000 per year.

To protect your business from legal obligation, you purchase liability insurance that will cost
$3,600 per year.

You hold four end-of-quarter parties to promote sales of your t-shirts. Each party costs you
about $1,000.

Please use this format:

?

Per Unit Cost (Variable) Annual Cost (Fixed) Business Costs Artist-contract Artist - design fee Computer/Printer Computer/Printer Depreciation - Computer/Printer Depreciation - Computer/Printer Depreciation - Heat Press Machine Heat Press Machine Liability Insurance Mall Rent Mall Rent Owners (shared) Parties Storage Unit Inkjet Cartridges Inkjet Cartridges Laser Paper Student Workers (3) Student Workers (3) T-shirts Transfer Paper Wrapping Paper/Box Product or Period Cost Variable or Fixed Cost Product Fixed Period Fixed Product (Transfer) Variable Fixed (a)- 0.00 0.00 (included list of fixed business costs) (included list of variable business costs) Variable (b)- Y=a+bX Y- (insert value) (insert value)X Y Solve for "Y" total mixed costs Total Revenue at $15/shirt Net Profit @ $15/shirt

Explanation / Answer

Boulevard Mall Business Costs Product or period costs Variable or fixed cost Per unit Variable Annual cost fixed 1 Artist Contract Product Fixed 10000 2 Artist Design Fee Product Fixed 300 3 Computer/Printer Product 4 Computer/Printer Period 5 Depreciation Computer/Printer Product Fixed 1800 6 Depreciation Computer/Printer Period Fixed 200 7 Depreciation Heat Press machine Product Fixed 1500 8 Heat Press Machine Product 9 Liability Insurance Period Fixed 3600 10 Mall Rent Product Fixed 2250 11 Mall Rent Period Fixed 250 12 Owners shared Period Fixed 12000 13 Parties Period Fixed 4000 14 Storage unit Product Fixed 1500 15 Inkjet Cartridges Product Variable 0.1 16 Inkjet Cartridges Period Variable 0.02 17 Laser Paper Period Variable 0.02 18 Student worker(3) Period Variable 0.4 19 Student worker(3) Product Variable 0.8 20 T Shirts Product Variable 3.75 21 Transfer Paper Product Variable 0.4 22 Wrapping Paper/BOX Period Variable 0.2 Fixed(a) 37400 Variable(b) 5.69 Y=a+bX Y=37400+5.69X Y=37400+5.69*7800 81782 Total Mixed cost =7800*15 117000 Total Revenue 35218 Net Profit We appreciate the rating of our answers Thank You

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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