W Promotions sells T-shirts imprinted with high school names and logos. Last year the shirts sold for $20 each, and variable costs were $8.50 per shirt. At this cost structure, the breakeven point was 24,600 shirts. However, the company actually earned $24,840 in net income.
This year, the company is increasing its price to $22 per shirt. Variable costs per shirt will increase by 20%, and fixed expenses will increase by $30,980. The tax rate will remain at 40%.
Required
a. Prepare a contribution format income statement for last year.
b. How many T-shirts must the company sell this year to break even?
c. How many T-shirts must the company sell this year in order to earn $56,640 in net income?
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