Becky Shelton, a teacher at Kemp Middle School, is in charge of ordering the T-shirts to be sold for the school's annual fund-raising project. The T-shirts are printed with a special Kemp School logo. In some years, the supply of T-shirts has been insufficient to satisfy the number of sales orders. In other years, T-shirts have been left over. Excess T-shirts are normally donated to some charitable organization. T-shirts cost the school $7 each and are normally sold for $14 each. Ms. Shelton has decided to order 770 shirts. Required a. If the school receives actual sales orders for 720 shirts, what amount of profit will the school earn? What is the cost of waste due to excess inventory? b. If the school receives actual sales orders for 800 shirts, what amount of profit will the school earn? What amount of opportunity cost will the school incur? a b Answer is complete but not entirely correct. Profit Waste due to excess inventory Profit Opportunity cost $ $ SS. $ $ 5,040 350 5,600 x 210
Becky Shelton, a teacher at Kemp Middle School, is in charge of ordering the T-shirts to be sold for the school's annual fund-raising project. The T-shirts are printed with a special Kemp School logo. In some years, the supply of T-shirts has been insufficient to satisfy the number of sales orders. In other years, T-shirts have been left over. Excess T-shirts are normally donated to some charitable organization. T-shirts cost the school $7 each and are normally sold for $14 each. Ms. Shelton has decided to order 770 shirts. Required a. If the school receives actual sales orders for 720 shirts, what amount of profit will the school earn? What is the cost of waste due to excess inventory? b. If the school receives actual sales orders for 800 shirts, what amount of profit will the school earn? What amount of opportunity cost will the school incur? a b Answer is complete but not entirely correct. Profit Waste due to excess inventory Profit Opportunity cost $ $ SS. $ $ 5,040 350 5,600 x 210
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
1.
Transcribed Image Text:### T-Shirt Sales Fundraising Exercise: Profit and Cost Analysis
#### Background Information:
Becky Shelton, a teacher at Kemp Middle School, is responsible for ordering T-shirts to be sold for the school's annual fundraising event. The T-shirts feature a special Kemp School logo. Historically, the supply of T-shirts has sometimes exceeded or not met the number of sales orders. Excess T-shirts are typically donated to a charitable organization. The purchase price of the T-shirts is $7 each, and they are sold for $14 each. For this event, Ms. Shelton has decided to order 770 T-shirts.
### Required Analysis:
1. **Scenario A: Actual Sales Orders of 720 Shirts**
- **Profit Calculation**: How much profit will the school earn?
- **Excess Inventory Cost**: What is the cost of waste due to excess inventory?
2. **Scenario B: Actual Sales Orders of 800 Shirts**
- **Profit Calculation**: How much profit will the school earn?
- **Opportunity Cost**: What amount of opportunity cost will the school incur?
### Provided Solution and Corrections:
The following table summarizes the provided answers and indicates the necessary corrections:
| Scenario | Item | Amount |
|------------------|--------------------------------|---------|
| **a.** | **Profit** | $5040 |
| | **Waste due to excess inventory** | $350 |
| **b.** | **Profit** | $5600 |
| | **Opportunity cost** | $210 |
The provided solution notes that "Answer is complete but not entirely correct."
### Detailed Graph/Diagram Explanation:
While the text explains a cost-profit analysis, no explicit graphs or diagrams provided. However, the calculations involved in this scenario can be summarized as follows:
#### Scenario A (720 T-Shirts Sold):
1. **Profit**:
- Revenue = 720 shirts * $14 each = $10,080
- Cost = 770 shirts * $7 each = $5,390
- Profit = Revenue - Cost = $10,080 - $5,390 = $4,690 (Note this might indicate a correction in the given table).
2. **Waste due to Excess Inventory**:
- Excess Inventory = 770 - 720 = 50 shirts
- Waste Cost = 50 shirts * $7 each = $350
#### Scenario B (
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