Business Costs Product or Period Cost Variable or Fixed Cost Per Unit Cost (Variable) Annual Cost (Fixed) Artist - contract Product Fixed $10,000 Artist - design fee Product Fixed $3,600 Computer/Printer 90% Product Fixed $5,400 Computer/Printer 10% Period Fixed $600 Depreciation - Computer/Printer 90% Product Fixed $1,800 Depreciation - Computer/Printer 10% Period Fixed $200 Depreciation - Heat Press Machine Product Fixed $1,500 Heat Press Machine Product Fixed $4,500 Liability Insurance Period Fixed $3,600 Mall Rent (Manufacutring) 90% Product Fixed $27,000 Mall Rent (Non-Manufacturing) 10% Period Fixed $3,000 Owners (shared) Period Fixed $12,000 Parties Period Fixed $4,000 Storage Unit (Manufacturing) Product Fixed $1,500 Inkjet Cartridges Product Variable $0.10 Inkjet Cartridges Period Variable $0.02 Laser Paper Period Variable $0.02 Student Workers (3) Product Variable $0.80 Student Workers (3) Period Variable $0.40 T-shirts Product Variable $3.75 Transfer Paper Product Variable $0.40 Wrapping Paper/Box Period Variable $0.20 Fixed (a) = $68,200.00 (included list of fixed business costs) Variable (b) = $5.69 (included list of variable business costs) Y =68200+5.69X

A. Contribution Margin per t-shirt = $9.31

B. Contribution Margin Ratio= 62.10%

C. Breakeven Number of shirts per year= 7326

D. Breakeven in sales= $109,823

E. Target $10,000 profit= 8,400 unitd

F.

Margin of safety = 117,000 - 109,823 = $7177

Percent margin of safety = $7177/$117,000 = 6.1 %

Degree of operating leverage = $72618/$4418 = 16.44

G. If sales could increase by 1,560 shirts (i.e. a 20% increase), by how much in dollars would net operating income increase? By what percentage would net operating income increase?

h. Prepare a contribution format income statement assuming a sales increase by 20% to 9,360 shirts. Compare your new net operating income with your answer in Question b and prove mathematically that your answers to the two questions in Question g are c o r r e c t .

i. Ignore Questions g and h. If the cost per plain t-shirt is expected to increase by 20% and sales (in number of T-shirts) are expected to be 5% less, how much is your projected net operating income (or loss)?

Please answer questions G-H