Question
Donnelly Corporation 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
Donnelly Corporation 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 after tax 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 ratio as last year is
$9.00
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$8.25
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$10.10
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