1) Cy-Ski Unlimited Inc. wants to launch a new line of ski jackets for their winter collection....

1) Cy-Ski Unlimited Inc. wants to launch a new line of ski jackets for their winter collection. The jackets are expected to sell at a price of $ 200 each. You can procure these jackets from a contract manufacturer overseas. You have estimated the total landed cost of men’s and women’s jackets will be $175 and $160 per unit respectively. You estimate fixed costs to be $ 260,000 (contract setup, ongoing monitoring, specialized equipment for your product, etc.).

a) If you expect to sell a sales mix is 1:1 (one men’s jacket sold for every women’s jacket) what is the breakeven point in units of jackets? dollar sales?

b) If the sales mix is 1:2 (one men’s jacket sold for every 2 women’s jacket) what is the break even point in units of men’s and women’s jackets and in dollar sales?

c) If the sales mix is 2:1 (two men’s jacket sold for every women’s jacket) what is the break even point in units of men’s and women’s jackets and in dollar sales?

d) Which sales mix (from a, b, c) should you choose?

e) With the sales mix selected (in d) how many units of men’s and women’s jackets will Cy-Ski Inc. need to produce/sell to have a profit of $100,000?

Expert Solution

a)	Contribution margin per men's jacket = 200-175 =	$ 25.00
	Contribution margin per women's jacket = 200-160 =	$ 40.00
	Weighted average contribution margin for a sales mix of 1:1 = 251/2+401/2 =	$ 32.50
	Breakeven point in composite units = Fixed cost/Weighted average CM = 260000/32.50 =	8000	Units
	Units of men's jackets = 8000*1/2 =	4000	Units
	Units of women's jackets = 8000*1/2 =	4000	Units
b)	Weighted average contribution margin for a sales mix of 1:2 = 251/3+402/3 =	$ 35.00
	Breakeven point in composite units = Fixed cost/Weighted average CM = 260000/35 =	7429	Units
	Units of men's jackets = 7429*1/3 =	2476	Units
	Units of women's jackets = 7429*2/3 =	4953	Units
c)	Weighted average contribution margin for a sales mix of 2:1 = 252/3+401/3 =	$ 30.00
	Breakeven point in composite units = Fixed cost/Weighted average CM = 260000/30 =	8667	Units
	Units of men's jackets = 8667*2/3 =	5778	Units
	Units of women's jackets = 8667*1/3 =	2889	Units
d)	The sales mix that gives the lowest BEP should be chosen, which is the mix at
	(b) above.
e)	Total contribution required = Fixed cost + Required profit = 260000+100000 = 360000.
	Composite units required with sales mix of 1:2 = 360000/35 =	10286
	Units of men's jackets = 10286*1/3 =	3429	Units
	Units of women's jackets = 10286*2/3 =	6857	Units

ekkarill92 answered 1 year ago

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