A small clothing company plans to sell a new line of shirts. The selling price will be $35 per shirt. The labor costs will be $5 per shirt. The cost of materials will be $10 per shirt. The administrative costs of operating the company are estimated to be $60,000 annually and the sales and marketing expenses are $20,000 a year. How many shirts it has to sell in order to break-even?

The correct answer is 4,000 shirts.

Explanation:

According to the scenario, computation of the given data are as follows:

Selling price = $35

Labor cost = $5

Cost of material = $10

So, Contribution margin amount = $35 - $5 - $10 = $20

And fixed cost = $60,000 + $20,000 = $80,000

So, we can calculate the breakeven units by using following formula:

Breakeven units = Fixed cost ÷ Contribution margin

= $80,000 ÷ $20

= 4,000 shirts

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.