Quench Their Thirst (QTT) is a not-for-profit organization located in Vancouver. It makes and sells bottled water, and for every bottle sold, it puts $0.25 toward providing clean drinking water to those in need. QTT works with another not-for-profit organization, Clean Water Aid (CWA), whose mission is to provide clean drinking water. Once CWA identifies an area of significant need, there are various ways that it provides aid. For example, in some cases, it donates or purchases equipment that will clean the water to be safe for consumption. In other cases, CWA ships water directly to the identified areas. CWA provides a detailed audited report annually of the aid provided to various affected areas. Once a year, the founder of CWA travels to the areas that have received support to ensure that the resources are being used effectively.

QTT has been in operation for just over a year, the two founders, Alex and Yim-Ling Huang, have been married for just over three years. In order to be able to devote themselves full-time to QTT, they live in Alexs parents basement. His parents are very generous and do not require any rent payments, but the couple is considering moving out soon. However, in order to do so, they will need to start to take more salary out of QTT. As it stands right now, the couple is paid a combined salary of $25,000 from QTT, which is the maximum amount of cash that is available for withdrawal. Alex and Yim-Ling are wondering by how much they would have to increase their sales in order to be able to withdraw a combined salary of $80,000. As they sat down to discuss whether it is feasible, they realized that arent even sure how many bottles of water they sold this year. The only thing they know is that, for every bottle of water they sell as a single bottle, they sell two cases of 24 bottles of water.

In order to get some help, Alex and Yim- Ling have asked for your assistance. You are a new certified professional accountant and have agreed to act as a treasurer on the QTTs board of directors. In order to help Alex and Yim-Ling with their request, you have asked them to provide you with a detailed list of their revenues and expenses (which they provided in exhibit 1). In addition to selling water bottles, Alex and Yim- Ling have considered selling merchandise to promote QTT. Many customers are excited about the organization because they feel they are helping those in need with every purchase they make. Alex and Yim-ling have done some research with respect to selling T-shirts and have provided their preliminary research in exhibit 2.

Required:

If they decide to pursue the sale of T-shirts, how many bottles of water, cases of water, and T-shirts would they have to sell to achieve the desired level of salary? Yim-Ling stated that she felt that for every water bottle they sold, they could sell 10 T-shirts. How will they achieve their salary of $80,000 with the sale of t-shirts and without the sale of t-shirts?

Exhibit 2 just gives this information T-shirts sell for $19.99 and the variable cost of the T-shirt is $8.99.

Exhibit 1 -

Canadian Managerial Accounting Cases EXHIBIT 1 - SUMMARY OF REVENUE AND EXPENSES Revenue $3,222,000 Water bottle sales Expenses Variable costs 2,689,050 Selling expenses 496,550 Taxes 10,920 Total expenses 3,196,520 Revenue over Expenses $ 25,480 Notes: Selling pricesingle water bottle Selling price, 24-bottle case $1.50 $9.99