Dorcan Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $13.20 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 23,800 shirts to break-even. The after tax net income last year was $6,180. Donnelly's expectations for the coming year include the following: (CMA adapted)
The sales price of the T-shirts will be $28.
Variable cost to manufacture will increase by one-third.
Fixed costs will increase by 10%.
The income tax rate of 40% will be unchanged.
Required:
1. The selling price that would maintain the same contribution margin ratio as last year is:
Multiple Choice:
a. $15.85. b. $17.60. c. $16.60. d. $17.10.