Sarahs t-shirts business makes and sells tie dyed and

Reference no: EM13602216

Sarah's T-Shirts business makes and sells tie dyed and embroidered T-Shirts. Sales information for the last year is shown below. During the year, Sarah's fixed manufacturing costs were $40,000 and fixed Selling and Administrative costs were $50,000.

Tie Dyed Embroidered
Sales units 15,000 8,000
Unit price $12 $18
Variable manufacturing cost/unit $7 $9
Sales commission (% sales) 10% 15%

A. Prepare an Income Statement in Contribution Margin format for Sarah's business. Calculate breakeven units and revenue for her total business. What is her margin of safety %? How many units would Sarah have to sell to earn a $90,000 profit?

B. Sarah's market research indicates she could sell 2,000 more Embroidered T-Shirts if she dropped the price to $17 and spent an additional $6,000 on Embroidered T-Shirt advertising. Should she do this? Show your calculations.

Reference no: EM13602216

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