Blue Ocean Company sells high-quality T-shirts. The business’s profit calculation for last year is shown here:

Sales revenue (3000 units @ $15)	$45,000
Less: Variable costs	(21,000)
Contribution margin	$24,000
Less: Fixed Costs	(18,000)
Profit	$6,000

Blue Ocean has indicated they are considering another possible price change to help increase the business’s profits. The alternative the business is considering is to increase the selling price per t-shirt to $17. They believe this would result in a loss of sales of 450 T-shirts.

Required:

1. Using the above income statement format, show the calculation of expected profit for Blue Ocean’s operation next year.
2. 
   
3. How many t-shirts would Blue Ocean have to sell to earn a profit of $9,000?
4. 
   
5. Do you agree with Blue Ocean’s decision? Explain why or why not.

Answer rating: 100% (QA)

To calculate the expected profit for Blue Oceans operation next year with the new selling price of 1... View the full answer