Three university students decided to operate an on-campus business producing and selling novelty t-shirts that also promoted their university name. They were able to secure the use of a room in one of the campus buildings for a charge of $800.00 total for the school year. The students decided that they each wanted $2000 income for the year for operating the business. Advertising and promotion costs were estimated at $400 for the year. They decided that the selling price for the t-shirts would be $12.00, and their best estimate of required sales to break even was 1800 shirts. A) What was the variable cost per unit? B) What was the contribution margin? D) What was the margin as a percentage of the cost?
Three university students decided to operate an on-campus business producing and selling novelty t-shirts that also promoted their university name. They were able to secure the use of a room in one of the campus buildings for a charge of $800.00 total for the school year. The students decided that they each wanted $2000 income for the year for operating the business. Advertising and promotion costs were estimated at $400 for the year. They decided that the selling price for the t-shirts would be $12.00, and their best estimate of required sales to break even was 1800 shirts. A) What was the variable cost per unit? B) What was the contribution margin? D) What was the margin as a percentage of the cost?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Three university students decided to operate an
on-campus business producing and selling
novelty t-shirts that also promoted their
university name. They were able to secure the
use of a room in one of the campus buildings for
a charge of $800.00 total for the school year.
The students decided that they each wanted
$2000 income for the year for operating the
business. Advertising and promotion costs were
estimated at $400 for the year. They decided
that the selling price for the t-shirts would be
$12.00, and their best estimate of required sales
to break even was 1800
shirts.
A) What was the variable cost per unit?
B) What was the contribution margin?
D) What was the margin as a percentage
of the cost?
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