Maddie Noticed That Many Students on Campus Had T-Shirts and Sweatshirts

Multiple Choice

Maddie noticed that many students on campus had t-shirts and sweatshirts with Greek organization letters or club names on them. Recognizing that there was a huge market for this attire, Maddie rented a store front and a silk screening machine to get into the t-shirt business. Maddie's rent is $1,000 a month, including utilities. The silk screen machine leases for $300 a month. Maddie can buy blank t-shirts for $4 each and sweatshirts for $10 each. Maddie calculated the cost of materials for the silk screening at $2 per unit. If Maddie sells a screened t-shirt for $20 and a sweatshirt for $25 each, which would she prefer the customer purchase?

A) T-shirt because the contribution margin is higher
B) Sweatshirt because the cost of production is lower
C) Sweatshirt because the selling price is higher
D) T-shirt because the cost of production is lower