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MARKETING - BREAKEVEN AND PROFIT ANALYSIS After years of buying overpriced scarves that she doesn’t really...

MARKETING - BREAKEVEN AND PROFIT ANALYSIS

After years of buying overpriced scarves that she doesn’t really need, Val has decided to start a business that manufactures a range of stylish yet affordable scarves in the U.A.E, she can sell in the U.S. (amounts in U.S dollars).

Each new scarf costs $6 to manufacture, and will retail at $16. The scarves are first sent to wholesalers in the U.S who earn $3 per scarf. The wholesalers distribute them to retailers who have a 15% margin. The plan is to ship the scarves in boxes (5 scarves in each box). shipping costs $5 per box.

Val has decided to attend trade shows in Washington, New York and Los Angeles in order to generate awareness of the new scarves. Each trade show costs $3,000. End user advertising has also been budgeted at $10,000. A part time sales agent has also been appointed (hiring cost $5,000) and this individual earns $0.5 for each scarf sold.

Questions:

  1. What level of dollar sales (revenue) and volume (units) is required to break even?
  2. What level of dollar sales (revenue) and volume (units) is required to meet a profit objective of $20,000?

Solutions

Expert Solution

Note :

1) There is a possibility of Retailers margin i.e. it is on sales price or Gross margin, hence i gave the both solution. you can take what you want.

2) If you have any queries kindly post a comment, i will solve it earliest.

3) If you satisfied with my answer, kindly give a thumbs up, it will help to encourage me.

ekkarill92 answered 2 years ago
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