ASU bookstore

Question

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? 

Answer 1

The cost to produce is $20/shirt they can be sold for $25/shirt so each shirt sold produces $5 of variable margin. If the bookstore makes and sells 600 shirts it will generate $3000 in margin. when you subtract the $150 setup fee the net income will be $2850. 

The bookstore should produce the shirts.

 

Jim