Question

Gina Fox has started her own company, Foxy Shirts, which manufactures imprinted shirts for special oc- casions. 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 rev- enue 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?

Answer 1

a. $300 and $60

b. 50 shirts and $750

Step-by-step explanation:

The computation is shown below:

a. The total revenue would be

= Number of shirts sold × selling price per shirts

= 20 shirts × $15

= $300

The variable cost would be

= Number of shirts sold × materials used in one shirt

= 20 shirts × $8

= $160

b. The net profit is

= Selling price per shirts - materials used in one shirt

= $15 - $8

= $7

And, the cost of using the equipment is $350

So, the break-even sales is

= $350 ÷ $7

= 50 shirts

And, the revenue is

= 50 shirts × $15

= $750