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Step-by-step explanation:
To determine the profitability of the T-shirt printing business, the class needs to follow these steps:
1. Identify the fixed costs: The class has already identified the fixed cost, which is the $50,000 provided by the business math teacher to get the business started.
2. Calculate the total cost: To find the total cost, the class needs to add the fixed costs to the variable costs. The variable costs are the expenses that change with the level of production or sales, such as the cost of ink, fabric, labor, and shipping.
3. Determine the break-even point: The break-even point is the point at which the business neither makes a profit nor incurs a loss. It is calculated by dividing the total fixed costs by the contribution margin (the difference between the selling price and the variable costs).
4. Calculate the contribution margin: The contribution margin represents the profit margin per shirt. It is found by subtracting the variable costs from the selling price.
5. Determine the minimum selling price: Once the class knows the contribution margin, they can use it to determine the minimum selling price required to cover all costs and make a profit. This is done by dividing the total cost by the contribution margin.
By following these steps, the class can determine the profitability of the T-shirt printing business and make informed decisions about pricing, production, and other aspects of the business.