Question
A small textile mill produces specialty T-shirts of high quality. It is currently operating at capacity, producing and selling 3,400 T-shirts per month. If sales
A small textile mill produces specialty T-shirts of high quality. It is currently operating at capacity, producing and selling 3,400 T-shirts per month. If sales increased at all, the mill would have to acquire a second loom, which would involve a new cost of $700 per month. The mill is currently selling its T-shirts to retailers for $20 per T-shirt. The mills variable costs are $12 per T-shirt.
(a) If the managers of the textile mill are considering a $2 increase in the price of these T-shirts, calculate the breakeven sales change for this price change. Show your work.
(b) On the other hand, if the managers are considering a $2 decrease in the price of these T-shirts, what would be the breakeven sales change? show your work.
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