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Laura owns a T-shirt business with fixed costs of $50,000 a year. Her selling price per shirt is $15. Each shirt has a variable cost of $5. How many shirts does Laura need to sell to break even?Responses15,00015,00025,00025,0003,3333,3335,0005,000

Question

Laura owns a T-shirt business with fixed costs of 50,000ayear.Hersellingpricepershirtis50,000 a year. Her selling price per shirt is 15. Each shirt has a variable cost of $5. How many shirts does Laura need to sell to break even?Responses15,00015,00025,00025,0003,3333,3335,0005,000

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Solution

To calculate the break-even point, we need to know how much profit Laura makes per shirt. This is the selling price minus the variable cost, which is 1515 - 5 = $10.

Next, we divide the fixed costs by the profit per shirt to find out how many shirts Laura needs to sell to cover her costs. This is 50,000/50,000 / 10 = 5,000 shirts.

So, Laura needs to sell 5,000 shirts to break even.

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