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At the end of October, Elizabeth lamented the company's situation: in the middle of production of Metlock-T's most popular long- sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Elizabeth went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirt, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $85,000 30,000 15,000 $130,000 20,000

At the end of October, Elizabeth lamented the company's situation: in the middle of production of Metlock-T's most popular long- sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Elizabeth went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirt, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $85,000 30,000 15,000 $130,000 20,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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(c) In the decision of whether or not to rework the bad batch of T-shirts, how much of the T-shirt cost was sunk? (Round answer to 2 decimal places, e.g. 15.25.) Sunk cost $ If Metlock-T could have sold the botched shirts in as-is condition for $10.20 per shirt to a salvage store, would it have been better off than fixing them? Gross margin $ /shirt Metlock-t would have been /unit selling them as-is.
Transcribed Image Text:(c) In the decision of whether or not to rework the bad batch of T-shirts, how much of the T-shirt cost was sunk? (Round answer to 2 decimal places, e.g. 15.25.) Sunk cost $ If Metlock-T could have sold the botched shirts in as-is condition for $10.20 per shirt to a salvage store, would it have been better off than fixing them? Gross margin $ /shirt Metlock-t would have been /unit selling them as-is.
At the end of October, Elizabeth lamented the company's situation: in the middle of production of Metlock-T's most popular long- sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Elizabeth went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirt, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $85,000 30,000 15,000 $130,000 20,000
Transcribed Image Text:At the end of October, Elizabeth lamented the company's situation: in the middle of production of Metlock-T's most popular long- sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Elizabeth went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirt, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $85,000 30,000 15,000 $130,000 20,000
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