Question

Right Fit Jeans Co.sels blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $30 with $20 in variable costs of goods sold. The company has fixed manufacturing costs of $1,150.00 marketing costs of $250,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 25% Read the events 0 Requirements Requirement 1. How many jeans must Right FR sell in order to break even? Select the formula labels, enter the amounts and at the breakeven number of pair of jeans Faed costs Contribution marin perunt Breakeven number of $ 400.000 $ 7.00 . 200.000 Requirements. How many jeans the company in order to reach a target operating income of $420.0007 Select the formula labels enter the amounts and calculate the number of fans required to be sold to reach a wrot operating income of $4 1. How many jeans must Right Fit sel in order to break even? 2. How many jeans must the company sel in order to reach: a target operating income of $420,000? D a net income of $420,000? 3. How manyjeans would Right have to sell to eam the net income in requirement Consider each requirement independently) the contribution margin per unit increases by 15% b. the sling price is increased to $32.00 the company outsources manufacturing to an overseas company Increasing variable costs per unit by $200 and saving 80% of fixed manufacturing costs. Quantity of units required to be sold - Print Done Choose from any rer u m put folds and then click Check Answer Check Answer BO 3 9

Answer 1

Req 1) Break Even Sales (in jeans) = Fixed Cost / Contri. Margin per jean

(1150000 + 250000)/(30-20-(30*10%)) = 1400000 / 7 = 200000 jeans

Req 2a) Jeans sold to reach a target operating income of $420000 :

Total Contribution required = 1400000 + 420000 = 1820000

Contribution per jean = 7

Jeans sold to reach a target operating income of $420000 = 1820000/7 = 260000 jeans

Req 2b) Jeans sold to reach a Net income of $420000 :

Operating income required = 420000/75% = 560000

Total Contribution required = 1400000 + 560000 = 1960000

Contribution per jean = 7

Jeans sold to reach a Net income of $420000 = 1960000/7 = 280000 jeans

Req.3a) Total contribution required = 1960000

Contribution margin = 7 * 1.15 = 8.05

Jeans sold to reach a Net income of $420000 = 1960000/8.05 = 243478.30 jeans

Req.3b) Total contribution required = 1960000

Contribution margin = (32-20-(32*10%)) = 8.80

Jeans sold to reach a Net income of $420000 = 1960000/8.8 = 222727.3 jeans

Req.3c) Total contribution required = (1150000*0.2)+250000+560000 = 1040000

Contribution margin = 7-2 = 5

Jeans sold to reach a Net income of $420000 = 1040000/5 = 208000 jeans