For the next year, you have collected some data relevant to the decision. Exhibit 20.12 shows cost information for the product when purchased from the supplier in China. Here we see that the cost for each sweater, delivered to the warehouse of our monogramming subcontractor, is $63.93. This price is valid for any quantity that we order above 5,000 sweaters. This order can be a mix of sweaters for each of the five schools we are targeting. The supplier needs 20 weeks to process the order, so the order needs to be placed around April 1 for the upcoming football season. Exhibit 20.12 COST INFORMATION FOR THE BIG TEN SWEATERS China supplier cost Material $33.80 Labor 12.50 Overhead 1.25 Transportation within China Supplier profit 9.09 Agent's fee 2.68 Freight (ocean carrier) 1.50 Duty, insurance, etc. 3.80 Total supplier cost $63.93 Domestic subcontractor cost Monogram material $ 4.50 Labor 8.89 Total subcontractor cost $12.50 Total (per sweater) $76.43 Exhibit 20.13 FORECAST DATA FOR THE BIG TEN SWEATERS AVERAGE LAST YEAR'S RHONDA 'S STEVE'S MARKET RESEARCH FOOTBALL GAME ACTUAL SALES FORECAST FOR FORECAST FOR FORECAST FOR AVERAGE STANDARD ATTENDANCE (FULL PRICE) NEXT YEAR NEXT YEAR NEXT YEAR FORECAST DEVIATION Ohio State 105, 261 2, 219 2,479 2,160 2, 778 2,467 395 Michigan 108,933 1,330 1, 758 1, 410 1,950 1, 703 273 Purdue 50, 457 1, 125 1, 058 989 1, 128 1,850 Michigan State 74, 741 1, 798 1, 419 1.598 1.56 146 Indiana 41,833 578 420 198 Penn State 107, 898 Wisconsin 80, 109 Iowa 70, 214 Illinois 59,545 Minnesota 50, 805 Northwestern 24, 198 Nebraska 85, 071 Total 4,665* 7, 608 6,539 7, 850 7,327 453* * 335 sweaters were sold through ebay for $50 each (the customer pays shipping on all orders). *Calculated assuming the demand at each school is independent = Our monogramming subcontractor gets $12.50 for each sweater. Shipping cost is paid by the customer when the order is placed. In addition to the cost data, you also have some demand information, as shown in Exhibit 20.13. The exact sales numbers for last year are given. The exhibit indicates the retail or "full price" sales for the sweaters that were sold for $120 each. Sweaters that we had at the end of the season were sold through eBay for $50 each and were not monogrammed. Keep in mind that the retail sales numbers do not accurately reflect actual demand since they stocked out of the OSU sweaters toward the end of the season. As for advertising the sweaters for next season, Rhonda is committed to using the same approach used last year. The firm placed ads in the football program sold at each game. These worked very well for reaching those attending the games, but she realized there might be ways to advertise that would open sales to more alumni. She has hired a market research firm to help identify other advertising outlets but has decided to wait at least another year to try something different.Forecasting demand is a major problem for the company. You have asked Rhonda and Steve to predict what they think sales might be next year. You have also asked the market research firm to apply their forecasting tools. Data on these forecasts are given in Exhibit 20.13. To generate some statistics you have averaged the forecasts and calculated the standard deviation for each school and in total. Based on advice from the market research firm, you have decided to use the aggregate demand forecast and standard deviation for the aggregate demand. The aggregate demand was calculated by adding the average forecast for each item. The aggregate standard deviation was calculated by squaring the standard deviation for each item (this is the variance). summing the variance for each item. and then taking the square root of this sum. This assumes that the demand for each school is independent, meaning that the demand for Ohio State is totally unrelated to the demand at Michigan and the other schools. You will allocate your aggregate order to the individual schools based on their expected percentage of total demand. You discussed your analysis with Rhonda and Steve and they are OK with your analysis. They would like to see what the order quantities would be if each school was considered individually. You are curious as to how much Rhonda and Steve made in their business last year. You do not have all the data, but you know that most of their expenses relate to buying the sweaters and having them monogrammed. You know they paid themselves $50.000 each and you know the rent, utilities, insurance, and a benefit package for the business was about $24,000. a. What was the net pre-tax profit for their business last year, after deducting salary and overhead? (Do not round Intermedlate calculations. Round your answer to the nearest dollar amount.) Net pre-tax profit b. If they must pay 50% in taxes after deducting their venture capital firm payment, what was the increase in cash that their business accrued last year? (Do not round Intermediate calculations. Round your answer to the nearest dollar amount.) Increase in cash