Becky Shelton, a teacher at Kemp Middle School, is in charge of ordering the T-shirts to be sold 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 a. If the school receives actual sales orders for 725 shirts, what amount of profit will the school earn? What is the cost of waste due to excess inventory? b. If the school receives actual sales orders for 820 shirts, what amount of profit will the school earn? What amount of opportunity cost will the school incur? a. b. Profit Waste due to excess inventory Profit Opportunity cost
Becky Shelton, a teacher at Kemp Middle School, is in charge of ordering the T-shirts to be sold 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 a. If the school receives actual sales orders for 725 shirts, what amount of profit will the school earn? What is the cost of waste due to excess inventory? b. If the school receives actual sales orders for 820 shirts, what amount of profit will the school earn? What amount of opportunity cost will the school incur? a. b. Profit Waste due to excess inventory Profit Opportunity cost
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:**](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F82edd437-bc56-4a13-8033-aae688ef2d14%2Ffe0f3459-20e8-40b9-b888-6027d07fd5da%2F1mwqkso_processed.png&w=3840&q=75)
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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