Question

George's T-Shirt Shop produces 8,000 custom-printed T-shirts per month. George's fixed costs are $24,000 per month. The marginal cost per T-shirt is a constant $9.
George's break-even price is _______ per shirt.

Suppose George sells 50% more T-shirts per month.

At this quantity of shirts, George's break-even price is _______ per shirt.

Answer 1

Answer:

1. $12

2. $8

Explanation:

1. At Break-Even, George's profit will be equal to their cost.

Revenue = Costs.

Variable costs are $9.

Fixed costs are $24,000

Quantity is 8,000 shirts

Let the Break-Even price be x.

8,000x = 24,000 + (9 * 8,000)

8,000x = 24,000 + 72,000

8,000x = 96,000

x = 96,000/8,000

= $12

2. At 50% more shirts. George's would be selling;

= 8,000 + 8,000(0.5)

= 12,000 shirts

New Break-Even Point will be;

12,000x = 24,000 + 72,000

12,000x = 96,000

x = 96,000/12,000

x = $8