The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hoope

Question

The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school. These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost Hooper $18.00 each with a minimum order of 360 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 50. Since Hooper’s plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $36.00 each. Hooper would pay the students a commission of $6.00 for each shirt sold. 2. Assume that the venture is undertaken and an order is placed for 360 sweatshirts. What would be Hooper’s break-even point in unit sales and in dollar sales? (Round your intermediate calculations and final answers to the nearest whole number.)

Explanation / Answer

Given That the steve hooper undertake an order which contains a minimum order that he comitted = 360

Cost Per Seeat Shirt = $18

Selling Price = $ 36 ( variable)

Sales Commision = $ 6 ( variable)

Cost of Order which is a fixed cost = 360* 18 = $6480

Contribution = sales p.u - commision p.u = 36-6 = 30 p.u

Break Even Point = Fixed cost/ Contribution Per unit = 6480/30 = 216 Units

Break Even sales = Break even qty * selling price per unit =216 * 36 = $7776

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