Alternative Order Policy Costs: The Committee for Human Improvement (CHI) is planning a fund-raising benefit. As part of the publicity and as a means of raising money, the committee plans to sell T- shirts with the CHI logo and a design commemorating the benefit event. However. since the committee has never held one of these benefits previously, there is no experience about the quantity of T-shirts to order. You've been asked to volunteer your knowledge of cost accounting and provide the committee with some information on the cost of alternatives. The committee expects it can sell 500 shirts at a minimum, but it will probably sell five times that amount. However, these numbers are very "soft." Since the committee is operating with limited funds, there is a desire to avoid undue risk in this T-shirt adventure. After contacting several T-shirt manufacturers, you conclude that the best price structure is as follows:

The shirts are expected to sell for $5 each. There are no costs to store the shirts since one of the committee members has volunteered storage space. However, unsold shirts are valueless.

Required: Prepare an analysis of the costs of alternative T-shirt order policies for the commit- tee. Since the sales volume is unknown, your report will have to focus on possible volumes. Use those suggested by the committee. Indicate to the committee the costs of each alternative and the differential or opportunity cost of selecting a less risky order size.

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Design logo and shirt Setup each production run $75.00 50.00 Cost per shirt: Order of 1-99 100-499 5.00 3.00 500-749 750-999 2.50 2.25 1,000-1,999 2.00 2,000-2,999 1.90 3,000 and over 1.80