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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:
At 8,000
At 10,000
T-shirts
T-shirt cost
$48,000
$60,000
Rent cost
$3,600
Utilities cost
$6,800
$8,300
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.
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