True Blue Apparel (TBA) manufactures plain white and solid-colored T-shirts. Budgeted inputs and alternative dye information include the following:

Price	Quantity	Cost per unit of output
Fabric	$8 per yard	0.75 yard per unit	$6	per unit
Labor	$8 per DMLH	0.50 DMLH per unit	$4	per unit
Dye*	$0.50 per ounce	8 ounces per unit	$4	per unit

*For colored T-shirts only

Budgeted sales and selling price per unit are as follows:

	Budgeted Sales	Selling Price per Unit
White T-shirts	7,000 units		$11	per T-shirt
Colored T-shirts	65,000 units		$18	per T-shirt

TBA has the opportunity to switch from using the dye it currently uses to using an environmentally friendly dye that costs$1.25 per ounce. The company would still need 8 ounces of dye per shirt. TBA is reluctant to change because of the increase in costs (and decrease in profit), but the Environmental Protection Agency has threatened to fine the company $392,100 if it continues to use the harmful but less expensive dye.

Requirement:

Given the preceding information, would TBA be better off financially by switching to the environmentally friendly dye? (Assume all other costs would remain the same.)
2.	Assume TBA chooses to be environmentally responsible regardless of cost, and it switches to the new dye. The production manager suggests trying Kaizen costing. If USA can reduce fabric and labor costs each by 2% per month, by how much will overall costs decrease at the end of 12 months? (Round to the nearest dollar for calculating cost reductions.)
3.	Refer to requirement 2. How could the reduction in material and labor costs be accomplished? Are there any problems with this plan?

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Requirement 1. Given the preceding information, would

TBA

be better off financially by switching to the environmentally friendly dye? (Assume all other costs would remain the same.)

Begin by calculating the increase in costs from switching to the environmentally friendly dye. (Round all intermediary calculations and the amounts you input in the cells to the nearest cent.)

Increase in Costs Assuming TBA uses New Dye

Cost differential between dyes

x

Units to dye

Increase in costs (from new dye) for the year