T-Shirt Company Challenge Answer Key:
Part 1 –
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Equal Production Cost Equation – 125 + 5x = 75 + 6x; x = 50 shirts
Part 2 –
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T-Shirt Mania Cost for 250 t-shirts, 125 + 5(250) = $1325
Hot Tees Cost for 250 t-shirts 80 + 6 (250) = $1580
Based on last year’s sales, T-Shirt Mania would be a better company selection because
they will be cheaper.
Part 3 –
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Break Even Point for T-Shirt Mania is 9x = 125 + 5x, x=31.25 shirts
o Student council will need to sell at least 32 shirts to break even.
Break Even Point for Hot Tees is 9x = 75 + 6x, x = 25 shirts
o Student Council will need to sell at least 25 shirts to break even.
Even though Hot Tees break-even point is a smaller number of t-shirts, T-Shirt Mania is a
better selection because they will save you more money in the long run. If you base
your selection of off last year’s sales, your profit for T-Shirt Mania would be $925, while
your profit for Hot Tees would be $670. (Profit = Revenue – Cost)
o T-Shirt Mania 250 shirts x 9 per shirt – 1325 production cost
o Hot Tees 250 shirts x 9 per shirt – 1580 production cost