Arlo”s T shirt Shop only has three costs: T shirt cost, rent cost on the shop, and
utilities cost. Arlo”s sells the T shirt for $14.50 each. Management has prepared the
following estimated cost information for next month:
|
|
At 8,000 |
At 10,000 |
|
|
T shirts |
T shirts |
|
T shirt cost |
$48,000 |
$60,000 |
|
Rent cost |
$3,600 |
$3,600 |
|
Utilities cost |
$6,800 |
$8,300 |
Assume that all of the activity levels mentioned in this problem are within the relevant
range.
Required:
a. Calculate what Arlo”s should expect for total variable cost if 9,000 T shirts are sold
next month.
b. Prepare Arlo”s contribution approach income statement for a monthly sales volume
level of 10,000 T shirts.