Question

	Dress shirt product lines
	Classic	Premium	Executive
Retail SP	$    75.00	$    95.00	$ 125.00
% of Total Sales	14%	7%	14%
Tailoring Costs	$    12.00	$    16.00	$    18.00
Shipping Costs	$    35.00	$    40.00	$    45.00
	Suit product lines
	Coat	Classic	Premium	Executive
Retail SP	$ 395.00	$ 475.00	$ 625.00	$ 850.00
% of Total Sales	20%	12%	13%	20%
Tailoring Costs	$    55.00	$ 115.00	$ 125.00	$ 135.00
Shipping Costs	$ 200.00	$ 210.00	$ 215.00	$ 220.00

Fixed costs $78/sqft in rental expense for a 400 sqft storage

Revenue = 600k

What if Style Inc. instead decided to increase the selling price of the product line with the lowest total contribution margin?
a. Assuming total revenue (and the revenue sales mix) is unaffected by the price increase, what price would they have to charge in order to meet the target contribution margin of $25,000?
b. Do you think this price is feasible? Why/why not?

Answer 1

77 $ 56 Dress Shirt Product Line Retail S.P. Lost $ 75.00 sales 600.000 7 of sales $ 45.00 price $125.00 14. s.P :- selling price Total C.P. 14 %. $47 C.P - Lost Price. Margin. $63 $28 contr :- contribution % of total conto. $39 $ 62 5.2267 (2 873 %) 6-944 % Ted – Increased suit product line. Retail S.P $395 $ 475 $625 $ 850. 7 of sales. 20% 122 13 20. Total cop $255 $325 $ 340 $355 Margin $14D $150 $285 $495 A By using this we % of total contr. 7.088 7. 3.789 7 5 .928% 11.647%. can calculate. total contribution - for total cont margin of classic margin Dreçe shirt for all items. retă units be sold. . d = 14 x sales Net sales - 75x a = 14 x sgales 95x100 100 28. a = 28 x Profit - (2547)xa = % sales profit % 14 x sales margin x 75 X 100 S. % total contr margin) so lowest total contr margin is for Premium Dress Shirt 1000 It's net profit margin is 39 X 7 X 600,000 = $17242.10526 7. TOO a5 constant): - a) If net profit is cheeping % sales will be ted to $25,000, net s.p üsing formula :- del (S.P . 56) x 7 x 600,000 SP - $138.351 = 25,000 S.P 100 as feasible it is is not more than Now, price w this pay sold at $138 for people won't which $125 Dress shirt is executive Premium, rather than buy Executive Dress shirt ADSI.