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 purchased a new quilting sewing machine for $3000 and other quilting tools, rulers and such for another $200. 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.
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?
Sarah finds that comparable quilts are being sold on consignment at a local baby furniture store for $180 each. The store takes a 25% commission on each sale. If Sarah decides to match the competition’s price and sell through the store, how many quilts will she need to make to break even?