Fold your t-shirt in half.
Lay the t-shirt on top of the sheet as shown.
Draw a tunic shape around it. The length of the sleeve can be measured from the shoulder seam of a t-shirt you are wearing, and mark a corresponding length from the shoulder seam of your pattern t-shirt.
Note that the line curves smoothly under the armpit, then flares out to the side. This cut adds the room that an underarm gusset and side gore would add in a pieced tunic.
Also note the curved bottom line. Make sure it curves up smoothly and looks as close to the picture as you can get it.
I would suggest making the tunic as long as the length of your bedsheet allows. You can always shorten it later if you need to.