a) Assume Danica is the owner of Danica Danes Inc. is a dress maker in Ithaca,...

  

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a) Assume Danica is the owner of Danica Danes Inc. is a dress maker in Ithaca, New York. Let us assume Danica Danes Inc. makes and sells sundresses to Gap Inc. for its Old Navy brand. For its 2020 budget, Danica Danes Inc. determined it would sell its dresses to Gap Inc. for $10 each. Danica Danes determined its variable labour per dress to be $2. And the variable materials cost per dress to be $1. Danica Danes budgeted its fixed costs for 2020 to be $5,000 per month. Gap Inc. is a leading global apparel retail company. It offers apparel and accessories for women, men, and children under the Gap, Banana Republic, Old Navy, Athleta, and Intermix brands. Assume that Gap sells the Danica Danes sundresses through its Old Navy retail stores for $25. How many dresses does Danica Danes Inc. need to sell to Gap Inc. to break even for the year 2021? (5 marks) b) On March 18, 2020 Gap Inc. reported that it would temporarily shut all its stores across North America as the COVID-19 pandemic escalated. On June 4, 2020 Gap Inc. reported a second quarter loss of almost $1 billion related to those closures. The stock price dropped 8% with this news. Assume that Danica Danes was asked by Gap Inc. to reduce its selling price by 20% for the last six months of the year. How many dresses would Danica Danes need to sell to the Gap to break-even in the last six months of the year. (5 marks) c) Identify five examples of cost items that could be variable costs for Danica Danes. And provide five examples of cost items that could be fixed costs for Danica Danes. (5 marks) Hint: Provide two lists of costs, one for Variable and one for Fixed. d) Why it is more challenging for Gap Inc to determine the breakeven point for any given Old Navy store in New York City as compared to Danica Danes in the previous question? Be sure to provide at least five well-substantiated points. (10 marks) Hints: You can answer in point form. Provide at least five points. Start by specifying why it was relatively easy to calculate the breakeven point for Danica Danes. a) Assume Danica is the owner of Danica Danes Inc. is a dress maker in Ithaca, New York. Let us assume Danica Danes Inc. makes and sells sundresses to Gap Inc. for its Old Navy brand. For its 2020 budget, Danica Danes Inc. determined it would sell its dresses to Gap Inc. for $10 each. Danica Danes determined its variable labour per dress to be $2. And the variable materials cost per dress to be $1. Danica Danes budgeted its fixed costs for 2020 to be $5,000 per month. Gap Inc. is a leading global apparel retail company. It offers apparel and accessories for women, men, and children under the Gap, Banana Republic, Old Navy, Athleta, and Intermix brands. Assume that Gap sells the Danica Danes sundresses through its Old Navy retail stores for $25. How many dresses does Danica Danes Inc. need to sell to Gap Inc. to break even for the year 2021? (5 marks) b) On March 18, 2020 Gap Inc. reported that it would temporarily shut all its stores across North America as the COVID-19 pandemic escalated. On June 4, 2020 Gap Inc. reported a second quarter loss of almost $1 billion related to those closures. The stock price dropped 8% with this news. Assume that Danica Danes was asked by Gap Inc. to reduce its selling price by 20% for the last six months of the year. How many dresses would Danica Danes need to sell to the Gap to break-even in the last six months of the year. (5 marks) c) Identify five examples of cost items that could be variable costs for Danica Danes. And provide five examples of cost items that could be fixed costs for Danica Danes. (5 marks) Hint: Provide two lists of costs, one for Variable and one for Fixed. d) Why it is more challenging for Gap Inc to determine the breakeven point for any given Old Navy store in New York City as compared to Danica Danes in the previous question? Be sure to provide at least five well-substantiated points. (10 marks) Hints: You can answer in point form. Provide at least five points. Start by specifying why it was relatively easy to calculate the breakeven point for Danica Danes.

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a To calculate the breakeven point for Danica Danes Inc for the year 2021 we need to consider the contribution margin per dress Contribution Margin per Dress Selling Price per Dress Variable Cost per ... View the full answer