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Calculating Break Even Point & Variable Cost

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1-14. 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?

1-15. Ray Bonds sells handcrafted yard decorations at county fairs. The variable cost to make these is $20 each, and he sells them for $50. The cost to rent a booth at the fair is $150. How many of these must Ray sell to break even?

1-16. Ray Bond, from Problem 1-15, is trying to find a new supplier that will reduce his variable cost of production to $15 per unit. If he was able to succeed in reducing this cost, what would the break-even point be?

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Solution Summary

There are three problems. Solutions to these problems depict the methodology to determine break even point in each case.

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1-14. 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, ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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