Answer to Question #98187 in Accounting for Jay

Answer to Question #98187 in Accounting for Jay

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Question #98187

George’s T-Shirt Shop produces 5,000 custom printed T-shirts per month. George’s fixed costs are $15,000 per month. The marginal cost per T-shirt is a constant $4. What is his break-even price? What would be George’s break-even price if he were to sell 50% more shirts?

Expert’s answer

FC + VC – PQ = 0, where FC – fixed costs, VC – variable costs, PQ – Volume of sales 15000 + 5000*4 – 5000*x = 0, x is break-even price x = $7. If sell will be increased on 50%, then15000 + (5000+50%)*4 – (5000+50%)*x = 0x = $6

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