At the end of October, Nancy lamented the company's situation: in the middle of production of Sandhill-T's most popular long-sleeve T-shirt, the company ran out of its usual collars, purchased from one main supplier. That supplier was also sold out. Sandhill-T could get a slightly different premade collar, from a new supplier, at the same cost. So Nancy went ahead with the order, hoping it wouldn't delay production or affect the quality of the shirts.
As it turned out, the new collars failed Sandhill-T's quality control testing. Stuck with unwearable T-shirts, the company was also in a bind with its retail outlets, which wanted more shirts to sell! The costs to produce this most recent batch of shirts is as follows.
Direct material $65,000
Direct labor 27,000
Manufacturing overhead 19,000
Total costs $111,000
Volume in batch 20,000
