Let x be the number of t-shirts and y the number of shorts they sold. Since in total they sold 266 items we have the equation:

Now we know that each shirt cost $2 and each short cost $4 and that the total sales were $672 then we have the equation:

Hence we have the system of equations:

Solving for y from the first equation we have:

Plugging this in to the second equation we have:

Plugging this value in the equation for y we have:

Therefore the sold 196 shirts and 70 shorts.