Arlo's T-shirt Shop only has three costs: T-shirt cost, rent cost on the shop, and utilities cost. Arlo's sells the T-shirt for $14.50 each. Management has prepared the following estimated cost information for next month:
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At 8,000
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At 10,000
|
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T-shirts
|
T-shirts
|
|
T-shirt cost
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$48,000
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$60,000
|
|
Rent cost
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$3,600
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$3,600
|
|
Utilities cost
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$6,800
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$8,300
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Assume that all of the activity levels mentioned in this problem are within the relevant range.
Required:
a. Calculate what Arlo's should expect for total variable cost if 9,000 T-shirts are sold next month.
b. Prepare Arlo's contribution approach income statement for a monthly sales volume level of 10,000 T-shirts.