What is the break-even point? What parameters are necessary to find it? Gina Fox

Question

What is the break-even point? What parameters are necessary to find it? Gina Fox has started her own company, Foxy Shirts, which manufactures imprinted shirts for special occasions. Since she has just begun this operation, she rents the equipment from a local printing shop when necessary. The cost of using the equipment is $350. The materials used in one shirt cost $8, and Gina can sell these for $15 each. (a) If Gina sells 20 shirts, what will her total revenue be? What will her total variable cost be? (b) How many shirts must Gina sell to break even? What is the total revenue for this?

Explanation / Answer

Answer:

a). Total revenue = 20*15 = $300

Total variable cost = 350+20*8 = $510

b).

let x be number of shirts.

For break even,

15*x = 350+8*x

X=50

She should sell 50 shirts to break even.

Total revenue is 15*50 = $750

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