CVP analysis, international cost structure differences Knitwear, Inc., is considering three countries for the sole manufacturing site of its new sweater: Singapore, Thailand, or the United States. All sweaters are to be sold to retail outlets in the United States at $32 per unit these retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit (sweater) differ in the three countries.

If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngrenfcost13e and download the template for Exercise 3-26.

1. Compute the breakeven point for Knitwear, Inc., in each country in (a) units sold (b) revenues.

2. If Knitwear, Inc., plans to produce and sell 800,000 sweaters in 2009, what is the budgeted operating income for each of the three manufacturing locations? Comment on theresults.

A Variable Annual Variable Manufacturing Fixed Marketing & Costs Cost Distribution Cost (Millions) per Sweater Country 5 Singapore 6 Thailand 7 United States per Sweater $ 8.00 $ 6.5 $11.00 $ 4.5 $ 5.50 $11.50 $ 9.00 $12.0 $13.00