Dorcan Corporation Manufactures and Sells T-Shirts Imprinted with College Names

Multiple Choice

Dorcan Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break-even. The after tax net income last year was $5,040. Donnelly's expectations for the coming year include the following: (CMA adapted)
∙ The sales price of the T-shirts will be $10.
∙ Variable cost to manufacture will increase by one-third.
∙ Fixed costs will increase by 10%.
∙ The income tax rate of 40% will be unchanged.
Based on a $10 selling price per unit, the number of T-shirts Dorcan Corporation must sell to break-even in the coming year is:

A) 17,000 units.
B) 16,500 units.
C) 20,000 units.
D) 22,000 units.