Practice your accounting skills and help each other out with Breakeven Analysis! Read the scenario below and provide answers (with explanations) to the questions below.

Sarah has always made beautiful baby quilts as gifts for friends and relatives. When she found out that she was pregnant, she has decided to quit her middle management job and make these quilts for a living, in order to spend more time with her new baby. She leased a new quilting sewing machine for $1900 per year and other quilting tools, rulers and such will cost her another $200 annually. After careful calculation, she estimated the material, quilt batting, and thread she used to cost about $30 per quilt. There is very little scrap as pieces not used in one quilt are often used in another; therefore, she chose not to include a scrap rate.

1. For the first year, all Sarah wants to do is to make enough money to cover her fixed and variable costs. She thinks that she can produce two quilts a month and still have plenty of time to enjoy her new baby. At what price must she sell the quilts in order to break even?
2. Sarah finds that comparable quilts are being sold on consignment at a local baby furniture store for $160 each. The store takes a 25% commission on each sale. Should Sarah consign her quilts at the store? If so, does this change her breakeven point?
3. Sarah didnt realize that a new baby would take so much time. She finds that shes able to make only about three quilts every two months. Under these new assumptions, what price does she need to charge in order to continue selling quilts without losing money? Would it make sense for her to do it? Justify your answer.