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Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows:

Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows:


                                                                                   T-SHIRTS                                         SWEATSHIRTS

Production and sales volume                       60,000 units                                        35,000 units

Selling price                                                                $16.00         $29.00

Direct material                                                             $ 2.00                                                  $ 5.00

Direct labor                                                                  $ 4.50                                                 $ 7.20

Manufacturing overhead                                             $ 2.00                                                  $ 3.00

Gross profit                                                                 $ 7.50                                                  $13.80

Selling and administrative                                          $ 4.00                                                   $ 7.00

  Operating profit                                                        $ 3.50                                                   $ 6.80


  1. What is projected operating income if direct materials costs of T-Shirts increase to $4.00 per unit and direct labor costs of Sweatshirts increase to $8.20 per unit?
  2. Under the revised ABC system, the activity-cost driver rate for the supervision activity is ________.

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