QUESTION 4 (CLO 3)

Knitwear Ltd is considering three countries for the sole manufacturing site of its new sweater: Cyprus, Turkey and Ireland. All sweaters are to be sold to retail outlets in Ireland at $32 per unit. These retail outlets add their own mark-up when selling to final customers. The three countries differ in their fixed costs and variable costs per sweater.

Country	Annual fixed cost $	Variable manufacturing costs per sweater ($)	Variable marketing and distribution costs per sweater ($)
Cyprus	6.5 million	8.00	11.00
Turkey	4.5 million	5.50	11.50
Ireland	12.0 million	13.00	9.00

Required:

Using the information above:

a) CALCULATE the break-even point of Knitwear Ltd in both (i) units sold, and (ii) revenues for each of the three countries considered for manufacturing the sweaters.

b) If Knitwear Ltd sells 800,000 sweaters in 2019, CALCULATE the budgeted operating profit for each of the three countries considered for manufacturing the sweaters.

COMMENT on the results.