Answered: Becky Shelton, a teacher at Kemp Middle…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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$### School Fundraising Project Analysis **Scenario:** Becky Shelton, a teacher at Kemp Middle School, is in charge of ordering T-shirts for the school’s annual fund-raising project. The T-shirts are printed with a special Kemp School logo. In some years, the supply of T-shirts has been insufficient to satisfy the number of sales orders. In other years, T-shirts have been left over. Excess T-shirts are normally donated to some charitable organization. T-shirts cost the school $7 each and are normally sold for $15 each. Ms. Shelton has decided to order 800 shirts. ### Required Analysis: #### a. If the school receives actual sales orders for 725 shirts: - **Profit Calculation:** - **Cost of Waste Due to Excess Inventory:** #### b. If the school receives actual sales orders for 820 shirts: - **Profit Calculation:** - **Opportunity Cost:** ### Table Template for Data Entry: \[ \begin{array}{|c|c|c|} \hline & \text{Profit} & \text{Waste due to excess inventory / Opportunity cost} \\ \hline a. & & \\ \hline b. & & \\ \hline \end{array} \] --- ### Calculation Details: #### a. Scenario (725 shirts sold): **Profit Calculation:** - **Revenue:** $ 725 \text{ shirts} \times \$15/\text{shirt} = \$10,875 $ - **Cost:** $ 800 \text{ shirts} \times \$7/\text{shirt} = \$5,600 $ - **Profit:** $ \$10,875 - \$5,600 = \$5,275 $ **Waste Calculation:** - **Excess Inventory:** $ 800 - 725 = 75 \text{ shirts} $ - **Cost of Excess Inventory:** $ 75 \text{ shirts} \times \$7/\text{shirt} = \$525 $ #### b. Scenario (820 shirts sold): **Profit Calculation:** - **Revenue:** $ 800 \text{ shirts} \times \$15/\text{shirt} = \$12,000 $ (Only 800 shirts available for sale) - **Cost:** $ 800 \text{ shirts} \times \$7/\text{shirt} = \$5,600 $ - **Profit:**$

Transcribed Image Text:### School Fundraising Project Analysis **Scenario:** Becky Shelton, a teacher at Kemp Middle School, is in charge of ordering T-shirts for the school’s annual fund-raising project. The T-shirts are printed with a special Kemp School logo. In some years, the supply of T-shirts has been insufficient to satisfy the number of sales orders. In other years, T-shirts have been left over. Excess T-shirts are normally donated to some charitable organization. T-shirts cost the school $7 each and are normally sold for $15 each. Ms. Shelton has decided to order 800 shirts. ### Required Analysis: #### a. If the school receives actual sales orders for 725 shirts: - **Profit Calculation:** - **Cost of Waste Due to Excess Inventory:** #### b. If the school receives actual sales orders for 820 shirts: - **Profit Calculation:** - **Opportunity Cost:** ### Table Template for Data Entry: \[ \begin{array}{|c|c|c|} \hline & \text{Profit} & \text{Waste due to excess inventory / Opportunity cost} \\ \hline a. & & \\ \hline b. & & \\ \hline \end{array} \] --- ### Calculation Details: #### a. Scenario (725 shirts sold): **Profit Calculation:** - **Revenue:** $ 725 \text{ shirts} \times \$15/\text{shirt} = \$10,875 $ - **Cost:** $ 800 \text{ shirts} \times \$7/\text{shirt} = \$5,600 $ - **Profit:** $ \$10,875 - \$5,600 = \$5,275 $ **Waste Calculation:** - **Excess Inventory:** $ 800 - 725 = 75 \text{ shirts} $ - **Cost of Excess Inventory:** $ 75 \text{ shirts} \times \$7/\text{shirt} = \$525 $ #### b. Scenario (820 shirts sold): **Profit Calculation:** - **Revenue:** $ 800 \text{ shirts} \times \$15/\text{shirt} = \$12,000 $ (Only 800 shirts available for sale) - **Cost:** $ 800 \text{ shirts} \times \$7/\text{shirt} = \$5,600 $ - **Profit:**

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