Problem 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? (F) Fixed Cost= $350.00

(V) Variable Cost= $8.00

(S) Selling Price= $15.00

(X) Number of Units Sold= 20

Revenues = (S)(X)

= (15)(20)

= $300.00

Total Variable Cost = (V)(X)

= (8)(20)

= $160.00

If Gina sells 20 shirts her total revenue will be $300.00 and her total variable cost will be $160.00.

(b) How many shirts must Gina sell to break even? What is the total revenue for this?

(F) Fixed Cost= $350.00

(V) Variable Cost= $8.00

(S) Selling Price= $15.00

(X) Number of Units Sold= ?

BEP=> 0=sX-f-vX

X=

X=

X= 50

Total Revenue = (S)(X)

= (15)(20)

= $750.00

Gina must sell 50 shirts to break even and she would have total revenue of $750.00.

Problem 1-17

Katherine D’ Ann is planning to finance her college education by selling programs at the football games for State University. There is a fixed cost of $400 for printing these programs, and the variable cost is $3. There is also a $1,000 fee that is paid to the university for the right to sell these programs. If Katherine was able to sell programs for $5 each, how many would she have to sell in order to break even? (F) Fixed Cost= $1,400.00

(V) Variable Cost= $3.00

(S) Selling Price= $5.00

(X) Number of Units Sold= ?

BEP=> X=

X=

X= 700

In order to break even selling each program for $5, Katherine would have to sell 700 programs.

Problem 1-20

Mysti Farris (see Problem 1-19) is considering raising the selling price of each cue to $50 instead of $40. If this is done while the costs remain the same, what would the new break-even point be? What would the total revenue be at this break-even point? BEP=> 0=sX-f-vX

X=

X=

X= 96

Total Revenue = (S)(X)

= (50)(96)

= $4,800.00

By raising the selling price of the cue from $40 to $50 the break-even point would be 96 and the total revenue at this break-even point would be $4,800.00.

Problem 1-22

Golden Age Retirement Planners specializes in pro- viding financial advice for people planning for a comfortable retirement. The company offers seminars on the important topic of retirement planning. For a typical seminar, the room rental at a hotel is $1,000, and the cost of advertising and other incidentals is about $10,000 per seminar. The cost of the materials and special gifts for each attendee is $60 per person attending the seminar. The company charges $250 per person to attend the seminar as this seems to be competitive with other companies in the same business. How many people must attend each seminar for Golden Age to break even? (F) Fixed Cost= $11,00.00

(V) Variable Cost= $60.00

(S) Selling Price= $250.00

(X) Number of Units Sold= ?

BEP=> 0=sX-f-vX

X=

X=

X= 57.89

To reach break-even the Golden Age seminar must have an attendance of 58 people.

Problem 1-23

A couple of entrepreneurial business students at State University decided to put their education into practice by developing a tutoring company for business students. While private tutoring was offered, it was determined that group tutoring before tests in the large statistics classes would be most beneficial. The students rented a room close to campus for $300 for 3 hours. They developed handouts based on past tests, and these handouts (including color graphs) cost $5 each. The tutor was paid $25 per hour, for a total of $75 for each tutoring session. (a) If students are charged $20 to attend the session, how many students must enroll for the company to break even? (F) Fixed Cost= $375.00

(V) Variable Cost= $5.00

(S) Selling Price= $20

(X) Number of Units Sold= ?

BEP=> 0=sX-f-vX

X=

X=

X= 25

If students are charged $20 for attending the session, 25 students must enroll for the company to break-even. (b) A somewhat smaller room is available for $200 for 3 hours. The company is considering this possibility. How would this affect the break-even point? (F) Fixed Cost= $275.00 (V) Variable Cost= $5.00

(S) Selling Price= $20.00

(X) Number of Units Sold= ?

BEP=> 0=sX-f-vX

X=

X=

X= 18.33

If a smaller room that charges 200 for 3 hours and students are charged $20 for attending the session, 18 students must enroll for the company to break-even.