Question
Tiger Pride produces two product lines: T−shirts and Sweatshirts. Product profitability is analyzed as follows: T-SHIRTS...
Tiger Pride produces two product lines: T−shirts and Sweatshirts. Product profitability is analyzed as follows:
|
T-SHIRTS |
SWEATSHIRTS |
|||
|
Production and sales volume |
68,000 units |
29,000 units |
||
|
Selling price |
$16.00 |
$29.00 |
||
|
Direct material |
$3.00 |
$5.00 |
||
|
Direct labor |
$4.50 |
$7.20 |
||
|
Manufacturing overhead |
$2.00 |
$3.00 |
||
|
Gross profit |
$6.50 |
$13.80 |
||
|
Selling and administrative |
$4.00 |
$7.00 |
||
|
Operating profit |
$2.50 |
$6.80 |
What is the projected decline in operating income if the direct materials costs of T−Shirts increase to $4.50
per unit and direct labor costs of Sweatshirts increase to $13.00 per unit?
A. $270,200
B. $683,000
C. $102,000
D. $168,200
Homework Answers
Answer #1
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