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At the end of October, Karen lamented the company's situation: in the middle of production of Metlock-T's most popular long-sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Karen went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirts, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $66,000 35,000 15,000 $116,000 20,000 Scrambling, Karen has gone back to her original supplier of collars, which thankfully now has a large quantity it can ship to her. These collars cost $0.50 each, and the company can get enough of them to go back and fix the collars on the recently ruined batch, plus put some into the warehouse for a future batch. In order to fix the botched T-shirts, though, Metlock-T will need to incur an extra $2 per shirt in labor costs to carefully remove the bad collars and re-attach the new ones. These reworked shirts should still be salable to retailers at the regular selling price. How much gross margin per unit will Metlock-T generate if it fixes and sells these reworked shirts? (Round answer to 2 decimal places, e.g. 15.25.) Gross margin $ /unit

At the end of October, Karen lamented the company's situation: in the middle of production of Metlock-T's most popular long-sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Karen went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirts, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $66,000 35,000 15,000 $116,000 20,000 Scrambling, Karen has gone back to her original supplier of collars, which thankfully now has a large quantity it can ship to her. These collars cost $0.50 each, and the company can get enough of them to go back and fix the collars on the recently ruined batch, plus put some into the warehouse for a future batch. In order to fix the botched T-shirts, though, Metlock-T will need to incur an extra $2 per shirt in labor costs to carefully remove the bad collars and re-attach the new ones. These reworked shirts should still be salable to retailers at the regular selling price. How much gross margin per unit will Metlock-T generate if it fixes and sells these reworked shirts? (Round answer to 2 decimal places, e.g. 15.25.) Gross margin $ /unit

FINANCIAL ACCOUNTING
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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At the end of October, Karen lamented the company's situation: in the middle of production of Metlock-T's most popular long-sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Karen went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirts, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $66,000 35,000 15,000 $116,000 20,000
Transcribed Image Text:At the end of October, Karen lamented the company's situation: in the middle of production of Metlock-T's most popular long-sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Metlock-T could get a slightly different premade collar, from a new supplier, at the same cost. So Karen went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts. As it turned out, the new collars failed Metlock-T's quality control testing. Stuck with unwearable T-shirts, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows. Direct material Direct labor Manufacturing overhead Total costs Volume in batch $66,000 35,000 15,000 $116,000 20,000
Scrambling, Karen has gone back to her original supplier of collars, which thankfully now has a large quantity it can ship to her. These collars cost $0.50 each, and the company can get enough of them to go back and fix the collars on the recently ruined batch, plus put some into the warehouse for a future batch. In order to fix the botched T-shirts, though, Metlock-T will need to incur an extra $2 per shirt in labor costs to carefully remove the bad collars and re-attach the new ones. These reworked shirts should still be salable to retailers at the regular selling price. How much gross margin per unit will Metlock-T generate if it fixes and sells these reworked shirts? (Round answer to 2 decimal places, e.g. 15.25.) Gross margin $ /unit
Transcribed Image Text:Scrambling, Karen has gone back to her original supplier of collars, which thankfully now has a large quantity it can ship to her. These collars cost $0.50 each, and the company can get enough of them to go back and fix the collars on the recently ruined batch, plus put some into the warehouse for a future batch. In order to fix the botched T-shirts, though, Metlock-T will need to incur an extra $2 per shirt in labor costs to carefully remove the bad collars and re-attach the new ones. These reworked shirts should still be salable to retailers at the regular selling price. How much gross margin per unit will Metlock-T generate if it fixes and sells these reworked shirts? (Round answer to 2 decimal places, e.g. 15.25.) Gross margin $ /unit
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