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Talking about the revenue drivers and profit margin, we have incurred certain costs for the production...

Talking about the revenue drivers and profit margin, we have incurred certain costs for the production of recycled sneakers. We will gather all the recycled materials where it will cost us around $3-5 to sanitizing and cleaning those old materials and further we have cost for renting the place to work on which is estimated around $300-400 per week. Moving on our labour cost have reached around $5 for design those sneakers. As we aim to keep the cost for recycled sneakers as low as possible our estimated cost per sneakers have come upto $10-12 depending on the design as well.

Fixed cost is rent

variable is sanitizing and cleaning cost

estimated sales per week is 300

Q)  question need to be solved Break-even chart and calculations for particular scenario.

Solutions

Expert Solution

Break-Even when rent is $300 and the selling price of one pair of sneakers is $10:

Cost of sanitizing = $3 per pair of sneakers

Rent = $300

Labour cost = $5 per pair of sneakers

Selling price of recycled sneakers = $10

Let the number of sneakers sold be x

Break-even occurs when total profit earned is zero.

Therefore, 10*x-(3+5)*x-300 = 0

10x-8x-300=0

2x=300

x=150

So, Break-even occurs when the number of sneakers sold is 150.

Break-Even when rent is $400 and the selling price of sneakers is $12:

Cost of sanitizing = $3 per pair of sneakers

Rent = $400

Labour cost = $5 per pair of sneakers

Selling price of recycled sneakers = $12

Let the number of sneakers sold be x

Break-even occurs when total profit earned is zero.

Therefore, 12*x-(3+5)*x-400 = 0

12x-8x-400=0

4x=400

x=100

So, Break-even occurs when the number of sneakers sold is 100.

Scenario 1:

Cost of sanitizing = $3 per pair of sneakers

Rent = $300

Labour cost = $5 per pair of sneakers

Selling price of recycled sneakers = $10

Estimated sales per week = 300

Total revenue = 300 * 10 = 3000

Total cost of sanitising and labour = (3+5)*300 = 2400

Total Profit = 3000-2400-300 = $300

Scenario 1:

Cost of sanitizing = $5 per pair of sneakers

Rent = $400

Labour cost = $5 per pair of sneakers

Selling price of recycled sneakers = $10

Estimated sales per week = 300

Total revenue = 300 * 10 = 3000

Total cost of sanitising and labour = (5+5)*300 = 3000

Total Profit = 3000-3000-400 = - $400

Scenario 1:

Cost of sanitizing = $5 per pair of sneakers

Rent = $300

Labour cost = $5 per pair of sneakers

Selling price of recycled sneakers = $12

Estimated sales per week = 300

Total revenue = 300 * 12 = 3600

Total cost of sanitising and labour = (5+5)*300 = 3000

Total Profit = 3000-3000-300 = $300

jeff jeffy answered 1 year ago
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