ASU bookstore is selling silk-screened T-shirts for the Thanksgiving Homecoming game. The setup fee is $150.00. The total cost to produce 100 T-shirts is $2000. The bookstore will sell the T-shirt for $25. How much is the bookstore paying for each shirt? The bookstore wants to produce 600 T-shirts. Should the bookstore produce the shirts?
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Cost = $150 + ($2000/100)x, where x is the number of T-Shirts produced
The cost for 600 shirts would be $150 + ($20)(600) = $12,150
The average cost of each shirt = $12,150/600 = $20.25
At a selling price of $25 per shirt, the bookstore needs to sell $12,150/$25 = 486 shirts to break even.
So if the book store thinks it can sell at least 486 of the 600 shirts, then it should go ahead and produce the shirts.