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Blue Ocean Company sells high-quality T-shirts. The businesss profit calculation for last year is shown here: Sales revenue (3000 units @ $15) $45,000 Less: Variable
Blue Ocean Company sells high-quality T-shirts. The businesss profit calculation for last year is shown here:
Sales revenue (3000 units @ $15) | $45,000 |
Less: Variable costs | (21,000) |
Contribution margin | $24,000 |
Less: Fixed Costs | (18,000) |
Profit | $6,000 |
Blue Ocean has indicated they are considering another possible price change to help increase the businesss profits. The alternative the business is considering is to increase the selling price per t-shirt to $17. They believe this would result in a loss of sales of 450 T-shirts.
Required:
- Using the above income statement format, show the calculation of expected profit for Blue Oceans operation next year.
- How many t-shirts would Blue Ocean have to sell to earn a profit of $9,000?
- Do you agree with Blue Oceans decision? Explain why or why not.
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