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

question 2

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 $6 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 $15 each, what is the contribution margin for t-shirts?

• A) $7 a unit
• B) $9 a unit
• C) $13 a unit
• D) $15 a unit

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Definitions:

Long-Run Adjustment

A process in which firms adjust their inputs and outputs to achieve the optimal level of production and efficiency over an extended period.

Farmer

An individual engaged in the activity of agriculture, aiming to produce crops and raise livestock for consumption or sale.

Calendar Time

The actual time measured by calendar days, weeks, months, or years, as opposed to other measures of time.