Question:
W Promotions sells T-shirts imprinted with high school names and logos. Last year the shirts sold for $18 each, and variable costs were $5.40 per shirt. At this cost structure, the breakeven point was 20,000 shirts. However, the company actually earned $15,120 in net income.
This year, the company is increasing its price to $21 per shirt. Variable costs per shirt will increase by one-third, and fixed expenses will increase by $30,900. The tax rate will remain at 40%.
Required
1. Prepare a contribution format income statement for last year.
2. How many T-shirts must the company sell this year to break even?
3. How many T-shirts must the company sell this year in order to earn $28,980 in net income?