Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profit

Question

Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: TSHIRTS SWEATSHIRTS Production and sales volume Selling price Direct material Direct labor Manufacturing overhead Gross proft Selling and administrative 60,000 units $16.00 $ 2.00 $ 4.50 S 2.00 $ 7.50 $ 4.00 $ 3.50 35,000 units $29.00 $ 5.00 7.20 $3.00 $13.80 $7.00 Operating profit $6.80 What is projected operating income if direct materials costs of T-Shirts increase to $4.00 per unit and direct labor costs of Sweatshirts increase to $8.20 per unit? 15) Under the revised ABC system, the activity-cost driver rate for the supervision activity is A) $2.58 B) $2.40 C) $2.24 D) $1.16

Explanation / Answer

Given T-SHIRTS SWEATSHIRTS Production and sales volume (In Units)          60,000                35,000 Selling price $        16.00 $              29.00 Direct material              2.00                     5.00 Direct labor              4.50                     7.20 manufacturing Overhead              2.00                     3.00 Gross profit $          7.50 $              13.80 Selling and administrative              4.00                     7.00 Operating profit              3.50                     6.80 Revised income statement T-SHIRTS SWEATSHIRTS Total Production and sales volume (In Units)          60,000                35,000 Selling price $        16.00 $              29.00 Direct material              4.00                     5.00 Direct labor              4.50                     8.20 manufacturing Overhead              2.00                     3.00 Gross profit $          5.50 $              12.80 Selling and administrative              4.00                     7.00 Operating profit              1.50                     5.80 x sales Units          60,000                35,000 Operating Income          90,000              203,000    293,000

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