Hoodys for Good manufactures and sells hooded sweatshirts. Thecompany locates its manufacturing facilities in areas with highunemployment rates and provides on-site daycare and education forits employees’ children. The company recently started a “one forone” program where they donate one sweatshirt for every one sold toan international charity to provide to a child in need. Thecustomer pays the shipping cost for items purchased, but thecompany pays to ship to the international charities. Costinformation is summarized below: Variable Costs Direct Materials$3.20 per unit produced Direct Labor $2.70 per unit producedVariable Manufacturing Overhead $0.70 per unit produced Shipping$2.80 per unit donated Fixed Costs Salaries $22,000 per monthAdvertising $55,000 per month Production Equipment $42,000 permonth Answer each of the following independent questions. 1. Assumethat the price of each sweatshirt sold is $30. a. How muchcontribution margin is earned on each unit sold to a payingcustomer? (Round your final answers to 2 decimal places.) b. Howmuch contribution margin is lost on each unit donated to charity?(Negative amounts should be indicated by a minus sign. Round youranswers to 2 decimal places.) c. If one sweatshirt is donated foreach one sold, what is the weighted-average contribution margin perunit produced? (Round your answers to 2 decimal places.) d. Howmany total units must be produced to break-even? How many must besold and how many donated? 2. If the company expects to sell 4,700sweatshirts and donate 4,700 sweatshirts per month, what price mustbe charged to earn a target profit of $22,000 per month? 3. Assumethat Hoodys for Good's managers are trying to decide whether to setthe price at $40 or $65. If the price is set at $40, they thinkthey can sell 10,200 units (and donate 10,200 units). If the priceis set at $65, they only expect to be able to sell (and donate)5,700 units. a. If the company’s goal is to maximize economicprofit, what price should they charge? b. If the company’s goal isto do the most social good, what price should they charge?
