H M N 1 Break-Even Analysis Using the Contribution Margin 2. Analyze the following three options and preform a Break Even analysis for each using the contribution margin method for Karl's T-Shirt Company 3 Option 1 Option 2 Option 3 Option 1 0 0 4 5 Volume (units) 6 Price per unit 7 Sales revenue 8 Unit variable cost 9 Contribution margin 10 11 Fixed costs 12 Cash fixed costs 13 Depreciation 14 Total fixed costs 0.00 0.00 0.00 Option 1 is to import the finished goods internationally for sale domestically in a retail outlet, this option requires a very high minimum purchase order 1250,000 Units) however has the advantage of a lower per unit cost and lower fixed costs. This plan has the following costs and revenue associated: Volume (units) : 250,000 Selling Price per unit: $11.99 Unit Variable Cost: $9.50 Fixed Costs $255,000 Depreciation: $5,000 0 0 15 Option 2 0 ooooo 0 0 0 16 Profitloss statement 17 Sales revenue 0 0 18 Variable costs 0 19 Contribution 0 20 Fixed costs 0 21 Profit (loss) 0 0 22 23 Break even point (in units) 24 Regular break-even DIV/0! DIV/0! 25 5 of sales #DIV/0! #DIV/0! 26 Cash break even #DIV/0! DIV/0! BreakEven Contribution Margin This option requires the purchase of a textile machine that can produce fabrics with a higher thread count. Unfinished goods are imported internationally in form of threads and then processed for final sale domestically. It will require an additional investment of $200,000 compared to option 1 but has the advantage of higher quality goods and as such will sell for a higher price. This plan has the following costs and revenue associated: Volume (units) - 180,000 Selling Price Per unit: $25.00 Unit Variable Cost: $21.00 Foxed Costs: $455,000 Depreciation: $10,000 DIV/0! #DIV/0! DIVZO! ENG yu o RI . Type here to search Be careful--files from the Internet can contain viruses. Unless you need to edit assier to stay in Protected View A49 Enable Foting you need to sell D HIV/0! #DIV/0! N #DIV/0! DIV/0! B 27 % of sales DIV/0! P8 9 Profit objective 10 to make (5) you need to sell (units) DIV/! 2 to make (5) 3 you need to sell (units) #DIV/0! to make (S) 5 you need to sell (units) #DIV/01 6 7 Break-even point (in revenue) B. 9 Regular break-even DIV/! E F G H Option 3 The last option is to sell custom T-shirts that are made to order. This option requires the highest fixed costs because it requires a printing machine to print custom labels or designs for customers. Variable costs for this option are low compared to other options and has the advantage of charging a premium for the shirts being custom and made to order This plan has the following costs and revenue associated: Volume (units): 30,000 Selling Price per unit: $35.00 Unit Variable Cost: $15.00 Fored Costs:$1.200,000.00 Depreciation: $40,000 #DIV/0! #DIV/0! DIV/0! WDIV/0! #DIV/01 #DIV/0! Which Option would you choose for the short term? What about for the long term? Why? You may input your answer below. 1 Cash break-even DIV/0! DIV/0! DIV/0! 3 Profit objective 0 5 #DIV/0! WDIV/0! 0 NDIV/0! 0 #DIV/0! 0 to make you need to sell to make you need to sell to make you need to sell O #DIV/0! #DIV/0! o 0 DIV/0! DIV/! #DIV/0! BreakEvenContribution Margin ENG NE O Type here to search