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MechandizeXZ Company produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: T-SHIRTS SWEATSHIRTS Production and sales volume 65288 units 18534 units

MechandizeXZ Company produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows:

T-SHIRTS SWEATSHIRTS

Production and sales volume 65288 units 18534 units

Selling price $16.00 $29.00

Direct material $2.43 $ 5.00

Direct labour $ 4.50 $8.52

Manufacturing overhead $ 2.00 $ 3.00

Selling and administrative $ 4.00 $ 7.00

Based on the information provided, compute the projected decline in operating income if the direct materials costs of T-Shirts increase to $3.24 per unit and direct labour costs of Sweatshirts increase to $14.94 per unit.

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