Designers Katherine and Jared MacLane so believe in the polo shirt they brought to market this past November that they are willing to share the nuts and bolts of their business - and they don't shy away from a tough question, such as pricing:

"Most of the polo shirts I can buy at retail are $90," said Moriarty. "And you're asking $155. How do you convince somebody to spend that kind of money on a polo shirt?"

"We just say, 'Just try it on!'" she laughed. "I think that people will see the difference.

"We almost took a backwards approach to manufacturing. A lot of people look at, 'Oh, how are we going to keep our costs low so we can make a higher profit?' And what we looked at is, 'What can we do to make this the best shirt possible?' And then we'll price it from there."

Katherine and Jared met while working at the Hermes boutique in Beverly Hills - which may help explain why they looked to France for the fabric for their shirts.

"A woman's shirt can take anywhere from a yard to a little less than a yard of fabric, per shirt," said Jared. "And that runs about $6.10 or $6.50 depending on what time of the year we buy."

True mother of pearl buttons were too expensive - a dollar each. They found similar but sturdier versions in Hong Kong.

"Our buttons are about three cents apiece," said Jared. There are three - plus an extra one "in case, you know, you need it down the road."

And instead of a box, the shirts are placed inside hand-embroidered linen bags from Vietnam.

"We didn't want to give the customer something that could be easily, you know, thrown away," Jared said. "We wanted it to be reused, wanted to be special. And we wanted to be of the same quality that the shirt is made.

The linen bags: $2.90 apiece.

But what adds most to the cost of the shirts? The MacLanes actually produce them here in the United States.

Jared said manufacturing the shirts domestically costs 75 percent more than making them outside the U.S. - a little over $11 per shirt.

And for how little could they be made in, say, China? One or two dollars.

There is also the cost of thread, the labels, cloth tape for the shirt vents, tissue paper, and shipping from the New York factory to the MacLanes' home in Atlanta.

All told, one KP MacLane polo shirt costs about $30 to make. Using the standard mark-up, the wholesale cost is $65.

As for the retail price? You may be surprised that clothing is usually marked up MORE than 100%. That's how the MacLanes arrived at $155.

"It sounds like, in order to make this company successful and have people buy your shirts, they really do have to kind of know the story behind each shirt," said Moriarty.

"Yeah, and we're happy to tell it," said Jared. "A lot of times we go shopping and you don't always consider what goes into a garment."

"If they know the kind of thought that we're putting behind our product, and they know the kind of quality that we're putting out there, I think if you build that loyalty and build trust, I think that that will keep you around a lot longer than somebody who's just craving a brand - as opposed to a brand and a quality product," said Katherine.

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1. What are the direct material costs of the making the shirt? List each item and the cost. Then total up the direct material costs.

Items:

Cost:

Total Direct Materials:

2. How much is the direct labor cost of producing the shirt?

3. The total cost of producing the shirt is $30.00. Using your answers to #1 and #2, how much manufacturing overhead cost must be assigned to each shirt? Show calculations:

4. Katherine & Jared MacLane sell the shirts to a wholesaler/retailer. Compute the profit per shirt that they make. Show calculations:

5. The shirt is then sold by the wholesaler/retailer. Compute the profit per shirt that retailer makes. Show calculations: