CVP analysis, sensitivity analysis. Roughstyle Shirts Co. sells shirts wholesale to major retailers across Australia. Each shirt has a selling price of $40 with $26 in variable costs of goods sold. The company has fixed manufacturing costs of $1,600,000 and fixed marketing costs of $650,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 30%.

Required:

1. How many shirts must Roughstyle sell in order to break even?
2. How many shirts must it sell in order to reach:
   1. a target operating income of $600,000?
   2. a net income of $600,000?
3. How many shirts would Roughstyle have to sell to earn the net income in part 2b if: (Consider each requirement independently.)
   1. the contribution margin per unit increases by 15%.
   2. the selling price is increased to $45.00.
   3. the company outsources manufacturing to an overseas company increasing variable costs per unit by $3.00 and saving 50% of fixed manufacturing costs.