Question
: Oakwood Industries produces two product lines for the year 2018: T-shirts and Sweatshirts. Product profitability is analyzed as follows: T-SHIRTS SWEATSHIRTS Production and sales
: Oakwood Industries produces two product lines for the year 2018: T-shirts and Sweatshirts. Product profitability is analyzed as follows: T-SHIRTS SWEATSHIRTS Production and sales volume 78,000 units 21,500 units Selling price $16.00 $29.00 Direct material $2.00 $ 5.00 Direct labor $ 4.50 $8.20 Manufacturing overhead $ 3.00 $ 4.00 Gross profit $7.50 $12.80 Selling and administrative $ 4.00 $ 7.00 Operating profit $3.50 $5.80 What is the projected decline in operating income if the direct materials costs of T-Shirts increase to $3.50 per unit and direct labor costs of Sweatshirts increase to $14.00 per unit? Give your answer in total dollars for the entire year.
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