Fashions, Inc. is a retail store that sells sweaters and jackets. In the past, it has bought all its sweaters from a supplier for $20 per unit. However, Fashions has the opportunity to acquire a small manufacturing facility where it could produce its own sweaters. The projected data for producing own sweaters are as follows:
Sales price......................$30
Variable costs...................15
Fixed costs...............150000
Required
a. If Fashions acquired the manufacturing facility, how many sweaters would it have to produce in order to break even?
b. To earn an after tax profit of $125,000, how many sweaters would Fashions have to sell if it buys the sweaters from the supplier? If it produces its own sweaters? Fashion's tax rate is 30%.