Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows:
Production and sales volume | 67,000 units | 20,000 units |
Selling price | $16.00 | $29.00 |
Direct material | $2.00 | $ 5.00 |
Manufacturing overhead | $ 2.00 | $ 3.00 |
Selling and administrative | $ 4.00 | $ 7.00 |
Operating profit | $3.50 | $5.80 |
What is the projected decline in operating income if the direct materials costs of T-Shirts increase to $3.50 per unit and direct labor costs of Sweatshirts increase to $14.00 per unit?
◦ $216,500
◦ $100,500
◦ $116,000
◦ $514,500