Reference no: EM132715877
Ruben Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break even. The net income last year was $5,040.
Ruben's expectations for the coming year include the following:
- The sales price of the T-shirts will be $9
- Variable costs to manufacture will increase by one-third
- Fixed costs will increase by 10%
- The income tax rate of 40% will be unchanged
Problem 1: The number of T-shirts Ruben Corporation must sell to break even in the coming year is:
a. 17,500
b. 19,250
c. 20,000
d. 22,000
Problem 2: Sales for the coming year are expected to exceed last year's by 1,000 units. If this occurs, Ruben's sales volume in the coming year will be:
a. 21,000 units
b. 21,960 units
c. 22,600 units
d. 23,400 units
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