Imagine you run a small company that makes custom t-shirts. You have the following information:

Fixed Costs (FC): $5,000 per month (this includes your rent for the workshop, equipment maintenance, and salaries of employees who are paid regardless of the number of shirts made).
Unit Variable Cost (unit VC): $8 per shirt (this includes the cost of fabric, printing, and labor that varies depending on how many shirts you produce).
Number of Shirts Produced and Sold: 1,000 shirts this month.
Selling Price: $20 per Shirt

How much will your profit increase (or decrease) if you make and sell one more shirt?

Question

Imagine you run a small company that makes custom t-shirts. You have the following information:

Fixed Costs (FC): $5,000 per month (this includes your rent for the workshop, equipment maintenance, and salaries of employees who are paid regardless of the number of shirts made).
Unit Variable Cost (unit VC): $8 per shirt (this includes the cost of fabric, printing, and labor that varies depending on how many shirts you produce).
Number of Shirts Produced and Sold: 1,000 shirts this month.
Selling Price: $20 per Shirt

How much will your profit increase (or decrease) if you make and sell one more shirt?

BlackTom AI · Accepted Answer

Profit change for one additional shirt equals the contribution margin: the extra revenue from selling the shirt minus the extra (variable) cost of producing it.

Relevant concepts:
- Fixed costs (FC) do not change with one more unit, so they are irrelevant for the marginal decision.
- Unit variable cost (VC) is the additional cost of producing one more shirt.
- Marginal revenue (MR) from one more shirt = selling price per shirt.
- Change in profit = MR − VC (also called contribution per unit).

Step-by-step reasoning and calculations:
1. Identify marginal revenue: MR = selling price = $20.
2. Identify marginal (additional) cost: MC = unit VC = $8. (Fixed costs of $5,000 remain unchanged whether you produce 1,000 or 1,001 shirts.)
3. Compute change in profit: Change = MR − MC = $20 − $8.
4. Intermediate arithmetic: $20 − $8 = $12.

Why this is correct:
Because fixed costs are sunk for the marginal decision, the only relevant costs when evaluating one more shirt are the variable costs that increase with production. The extra $20 revenue from selling the shirt covers the $8 variable cost and contributes the remaining $12 to profit (or towards fixed costs). Thus profit increases by $12.

Why the other options are incorrect:
- $8: This is the additional cost, not the net change in profit; it ignores the revenue from selling the shirt.
- $20: This is the revenue received, not the profit increase; it ignores the additional cost to produce the shirt.
- Not enough information: Incorrect because all necessary figures (selling price and unit variable cost) are provided; fixed costs are irrelevant for the one-unit margin.

Conclusion: The profit will increase by $12, matching the provided correct answer "$12".

类似问题

A company's contribution margin per unit is $25. If the company increases its activity level from 200 units to 350 units, how much will its total contribution margin increase?

Zipee Inc.'s unit selling price is $90, unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. How much will income from operations change if sales increase by 5,000 units?

Calculate the per-unit contribution margin of a product that has a sale price of $200 if the variable costs per unit are $65.

Calculate the per-unit contribution margin of a product that has a sale price of $400 if the variable costs per unit are $165.

A product has a sales price of $161 and a per-unit variable cost of $53. What is the contribution margin ratio? Please answer to 2 decimal places

A product has a contribution margin ratio of 0.56. The sales price for the product is $38. The business has sold 87 units over the period. What is the total contribution margin? Please answer to 2 decimal places.

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

If a company had a contribution margin of $1,000,000 and a contribution margin ratio of 40%, total variable costs must have been

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