Question

*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

1.) If Gina sells 20 shirts, her total revenue will be _________.

1. 200
2. 150
3. 250
4. 300?

2.) If Gina sells 20 shirts, her total variable cost will be _________.

1. 180
2. 160?
3. 120
4. 140

3.) Based on the above information, Gina must sell 50 shirts to break even. (Hint: Please enter a single number only and round it to an integer if necessary. No decimal points.)   BEP___50?___

4).Based on the calculation in the previous question, Gina's total revenue at the breakeven point of output is. (Hint: Please enter a single number only and round it to an integer if necessary. No decimal points.)   Total revenue at the breakeven point of output ____750?___

Answer 1

1) Answer: 300

Total revenue = Price * Quantity

Price = Selling price = 15$

Quantity = 20

Total revenue = 15*20 = 300

2) Answer: 160

Cost of using the equipment is a fixed cost

Cost of materials is a variable cost as if the quantity of Shirts produced increase than variable cost also increase.

Variable cost = Cost of material * quantity

Variable cost = 8*20 = 160

3) Break even quantity = FC/ (P-VC)

FC = Fixed cost = 350

VC = Cost of material used in one shirt = 8

P = selling price per unit = 15

Break even quantity = 350/(15-8)

Break even quantity = 350/7 = 50

4) TOTAL revenue at break even point = 15*50 = 750