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Finease Fox started her own business, Foxy Shirts, which imprints shirts for special occasions
Finease Fox started her own business, Foxy Shirts, which imprints shirts for special occasions. Since she has just begun, she rents the equipment from a local printing shop when necessary. The cost of using the equipment is 8 Php, and Finease can sell these for 15 Php each.
a. if Finease sells 20 shirts, what will be her total revenue? What will her variable cost be?
b. How many shirts must Finease sell to break even? What is the total revenue for these?
Expert Solution
a. Computation of Total Revenue and Total Variable Cost:
Total Revenue = 20 shirts * 15 Php = 300 Php
Total Variable Cost = 20 shirts * 8 Php = 160 Php
b. Computation of Break-even Point and Total Revenue at Break-even Point:
Break-even Point = Fixed Cost/(Revenue - Variable Cost)
= 350 Php / (15 Php - 8 Php)
= 350 Php / 7 Php
Break-even Point = 50 shirts
Total Revenue at Break-even Point = 50 shirts * 15 Php = 750 Php
Note: The cost of using the equipment is 350 Php assumed.
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