6. 9. 7. Questions 6 through 9 are based on Donnelly Corporation, which manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break even. The net income last year was $5,040. Donnelly's expectations for the coming year include the following The sales price of the T-shirts will be $9 Variable cost to manufacture will increase by one-third Fixed costs will increase by 10% The income tax rate of 40% will be unchanged The selling price that would maintain the same contribution margin rate as last year is The number of T-shirts Donnelly Corporation must sell to break even in the coming year is 8. Sales for the coming year are expected to exceed last year's by 1,000 units. If this occurs, Donnelly's sales volume in the coming year will be If Donnelly Corporation wishes to earn $22,500 in net income for the coming year, the company's sales volume in dollars must be Questions 10 through 12are based on Leland Manu- facturing, which uses 10 units of Part Number KJ37 each month in the production of radar equipment. The unit cost to manufacture 1 unit of KJ37 is presented below. Direct materials Materials handling (20% of direct material cost) Direct labor Manufacturing overhead (150% of direct labor) Total manufacturing cost $1,000 200 8,000 12,000 $21.200 10. If Leland purchases the KJ37 units from Scott, the capacity Leland used to manufacture these parts would be idle. Should Leland decide to purchase the parts from Scott, the unit cost of KJ37 would Increase or decrease? By how many dollars? 11. Assume Leland Manufacturing is able to rent all de capacity for $25,000 per month. If Leland decides to purchase the 10 units from Scott Supply, Leland's monthly cost for KJ37 would Increase or decrease? By how many dollars? 12. Assume that Leland Manufacturing does not wish to commit to a rental agreement but could use idle capacity to manufacture another product that would contribute $52,000 per month. If Leland elects to manufacture KJ37 in order to maintain quality control, Leland's opportunity cost is How many dollars? Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Leland's annual manufac turing overhead budget is one-third variable and two- thirds fixed. Scott Supply, one of Leland's reliable vendors, has offered to supply Part Number KJ37 at a unit price of $15,000