Braided Rugs, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Portugal, and Thailand. All area rugs are to be sold to retail outlets in the United States for $250 per unit. These retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit (area rug) differ in the three countries.

Required

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

2. If Braided Rugs, Inc., plans to produce and sell 80,000 rugs in 2017, what is the budgeted operating income for each of the three manufacturing locations? Comment on the results.

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Country Portugal Italy Thailand Sales Price to Retail Outlets $250.00 250.00 250.00 Annual Fixed Costs $7,500,000 5,000,000 9,000,000 Variable Manufacturing Cost per Area Rug S45.00 65.00 55.00 Variable Marketing & Distribution Cost per Area Rug S10.00 15.00 20.00