Variable Cost
			Cost Items		Cost per T-Shirt
Manufacturing
Cost of T-shirt			3.75		3.75
Transfer Paper (400/1000 Sheets)					0.4
Ink-Jet catridge ($50/500) prints					0.1
Labour Charges of part time workers Printing (1 Hour*$8)/10 shirts					0.8
Total Variable Manufacturing Cost per T-Shirt					5.05
Non-Manufacturing
Ink-Jet catridge ($50/500)*1 print/5 shirts					0.2
Laser paper ($20/200sheets)					0.1
Wrapping Paper and box					0.2
Labour Charges of part time workers Flod,wrap and box (1 Hour*$8)/20 shirts					0.4
Total Variable Non-Manufacturing Cost per T-Shirt					0.72
Total Variable Cost per T-Shirt					5.77

Fixed Cost
			Cost Items		Cost per Year
Manufacturing
Stoneridge charges(2500*12*90%)					27000
Storage units (125*12)					1500
Design charges (10000+300)					10300
Campeuter and Printer (6000/3)*90%					1800
Heat press Machine (4500/3)					1500
Total Fixed Manusacturing Cost per Year					42100
Non-Manufacturing
Stoneridge charges(2500*12*10%)					3000
Compeuter and Printer (6000/3)*10%					200
Selling and administrative					12000
Insurance					3600
Party Expenses (4*1000)					4000
Total Fixed Non-Manufacturing Cost per Year					22800
Total Fixed Cost per Year					64900

Y=a+bX
Y= Total cost
a= Fixed cost	64900
b= Varlable cost	5.77
X= Namber of T-shirts sold

Y=64900+5.77*7800=109606
Profit if the sale price is $15 per T-shirt
Sales=Namber of T-shirts sold*sale price
Sales=7800*15=		117000
Profit=Sales-Total cost
Profit=117000-109606=		7394

1. If sales could increase by 1,560 shirts (i.e. a 20% increase), by how much in dollars would net operating income increase? By what percentage would net operating income increase? 2. Prepare a contribution format income statement assuming a sales increase by 20% to 9,360 shirts. Compare your new net operating income with your answer in Question 2 and prove mathematically that your answers to the two questions in Question 7 are correct. 3. Ignore Questions 7 and 8. If the cost per plain t-shirt is expected to increase by 20% and sales (in number of T-shirts) are expected to be 5% less, how much is your projected net operating income (or loss)? 4. Continue Question 9. If the only expense you can cut is the salary paid to yourselves, how much salary should you cut in order to break even? 5. Ignore Question 9 and 10. Assume that you have produced 7,800 t-shirts, but the actual sales for the first year turn out to be 7,000 T-shirts instead of 7,800. I.e. you will have 800 T- shirts left at the end of the first year. Prepare (a) a traditional format income statement and (b) a contribution format income statement. Are the two net operating income figures the same? Why or why not? 6. Continue 11. At what amount would inventory be reported in the balance sheet of 12/31/2020 under (a) the absorption costing and (b) variable costing? Are the two ending inventory figures the same or different? Why?