Question

ACCOUNTING hapter 3 Qulz instructions t help K Revew Question 3 (o25) Score This Question Save & Ext Su 3. Dorcan 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 so menufacture th s $2 25 per unit The company needed to sell 20000 shirts to break-ever. The after tax net income last year was $5,040 Donnelys expectations for the coming yew nclide the fol wrs ou adepted The sales price of the T-shits wl be 310 . Variable cost to manufacture will increase by one thrd Fixed costs wa ncrease by 10% + The income tax rote of 40% wil be unchanged f voire "deanut be Bosed on。S10 seling price per unit and Dorcan Corporation whhes to earn $37800 nther tax ret ncome for the coring year the eaney, um $213.750 O $257625 O 5207000 O $255000 Search Windows ViewSonic

Answer 1

Existing Fixed costs

	Per unit	Total
Contribution ($7.50 - $2.25)	5.25
20,000 x $5.25		105,000
Fixed costs = Contribution Margin		105,000
Revised Fixed costs $105,000 x 110%		115,500

Revised contribution Margin
($10.00 - $2.25*1.33) = $7

BEP (in dollars) = $115,500 / $7.00 = 16500