How many T-shirts must the company sell this year to break even? ### Educational Website: Contribution Format Income Statement Analysis---**W Promotions and T-shirt Sales Analysis:**W Promotions specializes in selling T-shirts imprinted with high school names and logos. Last year, the shirts sold for $20.00 each, with variable costs amounting to $8.50 per shirt. Given this cost structure, the breakeven point was 24,600 shirts. However, W Promotions surpassed this breakeven point and achieved a net income of $24,840.---#### Upcoming Year Projections:- **New Selling Price**: The company has decided to increase the price to $22 per shirt.- **Variable Cost Increase**: Variable costs per shirt will increase by 20%.- **Fixed Expenses**: Fixed expenses will increase by $30,980.- **Tax Rate**: The tax rate will remain fixed at 40%.---### Contribution Format Income Statement for Last Year:To facilitate financial analysis and decision-making, a contribution format income statement was prepared for the previous year, as shown below:**W Promotions Contribution Income Statement**| **Description** | **Total Amount** | **Per Unit** ||---------------------------|------------------|--------------|| **Sales** | $564,000 | $20.00 || **Variable Expenses** | $(239,700) | $(8.50) || **Contribution Margin** | $324,300 | $11.50 || **Fixed Expenses** | $(282,900) | - || **Operating Income** | $41,400 | - || **Income Tax** (40%) | $(16,560) | - || **Net Income/(Loss)** | $24,840 | - |**Details of the Contribution Format Income Statement**:1. **Sales**: The total sales represent the income generated from selling T-shirts. With a selling price of $20 per shirt, total sales achieved were $564,000.2. **Variable Expenses**: These are costs that vary with the level of output. The total variable expenses amounted to $239,700 based on a unit variable cost of $8.50.3. **Contribution Margin**: This is calculated by subtracting variable expenses from total sales, yielding a total contribution margin of $324,300.4. **Fixed Expenses**: These expenses remain

Breakeven point is that point of sales revenue at which business is recovering its fixed costs and…

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Business

Accounting

How many T-shirts must the company sell this year to break even?

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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pp. Subject :- Accounting
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