Exercise 1-14A (Algo) Using JIT to minimize waste and lost opportunity LO 1-5

Becky Shelton, a teacher at Kemp Middle School, is in charge of ordering the T-shirts to be sold for the schools annual fund-raising project. The T-shirts are printed with a special Kemp School logo. In some years, the supply of T-shirts has been insufficient to satisfy the number of sales orders. In other years, T-shirts have been left over. Excess T-shirts are normally donated to some charitable organization. T-shirts cost the school $7 each and are normally sold for $14 each. Ms. Shelton has decided to order 740 shirts. Required

1. If the school receives actual sales orders for 665 shirts, what amount of profit will the school earn? What is the cost of waste due to excess inventory?

2. If the school receives actual sales orders for 760 shirts, what amount of profit will the school earn? What amount of opportunity cost will the school incur?