Arlo's T-Shirt Shop only has three costs: T-shirt cost, rent cost on the shop, and utilities cost. Arlo's sells the T-shirt for $14.50 each. Management has prepared the following estimated cost information for next month:
At $8,000
T-shirt cost: $48,000
Rent cost: $3,600
Utilities cost: $6,800
At $10,000
T-shirt cost: $60,000
Rent cost: $3,600
Utilities cost: $8,300
Assume that all of the activity levels menti9oned in this problem are within the relevant range.
Required:
a. Calculate what Arlo's should expect for total variable cost if 9,000 T-shirts are sold next month.
b. Prepare Arlo's contribution approach income statement for a monthly sales volume level of 10,000 T-shirts.