Understanding Fixed Costs in T-Shirt Production for Kansas City Apparels Ltd.

What is the fixed cost of producing t-shirts for Kansas City Apparels Ltd.?

The fixed cost of producing t-shirts for Kansas City Apparels Ltd. is the portion of costs that remains constant regardless of the level of t-shirt production.

Fixed Costs Explanation

Fixed costs are expenses that do not vary with the quantity of goods produced. They include costs such as rent for the production facility, salaries of permanent employees, insurance, and other expenses that are necessary to operate the business but do not directly depend on the number of t-shirts produced.

These costs remain constant regardless of whether the company produces 100 t-shirts or 1,000 t-shirts. In the case of Kansas City Apparels Ltd., the fixed cost represents the expenses that are incurred to maintain the production capacity for Chiefs t-shirts.

It is important for the company to cover these fixed costs to ensure the viability of their operations and maintain their exclusive license to sell the apparel. The fixed cost serves as a baseline expense that needs to be covered before the company can generate profit from selling t-shirts.

Fixed costs are essential to consider in the overall cost structure of t-shirt production, as they provide stability and support for the business regardless of fluctuations in production levels or sales volumes.