G H M Break-Even Analysis Using the Contribution Margin Analyze the following three options and preform a Break-Even analysis for each using the contribution Option 1 Option 2 Option 3 margin method for Karl's T-shirt Company. 5 Volume [units] 6 Price per unit Option 1 Sales revenue 0 O Option 1 is to Import the finished goods internationally for sale domestically in a retail outlet, this option 8 Unit variable cost requires a very high minimum purchase order (250,000 Units) however has the advantage of a lower per 19 Contribution margin 0.00 0.00 0.00 unit cost and lower fixed costs. This plan has the following costs and revenue associated: Volume (units) : 250,000 Fixed costs Selling Price Per unit: $11.99 Cash fixed costs Unit Variable Cost: $9.50 Depreciation Fixed Costs:$255,000 14 Total fixed costs Depreciation: $5,000 0 O 16 Profitloss statement Option 2 17 Sales revenue 18 Variable costs This option requires the purchase of a textile machine that can produce fabrics with a higher thread count. Unfinished goods are imported internationally in form of threads and then processed for final 19 Contribution sale domestically. It will require an additional Investment of $200,000 compared to option 1 but has the 20 Fixed costs advantage of higher quality goods and as such will sell for a higher price. This plan has the following 21 Profit ( loss) costs and revenue associated: Volume (units) : 180,000 23 Break-even point (in units] Selling Price Per unit: $25.00 Regular break-even #DIV/O! #DIV/O! #DIV/O! Unit Variable Cost: $21.00 % of sales #DIV/O! #DIV/O! #DIV/O! Fixed Costs:$455,000 Cash break-even #DIV/O! #DIV/O! #DIV/O! Depreciation: $10,000 % of sales #DIV/O! #DIV/O! #DIV/O! Option 3 29 Profit objective The last option is to sell custom T-shirts that are made-to-order. This option requires the to make ($) highest fixed costs because it requires a printing machine to print custom labels or designs for you need to sell (units #DIV/O! #DIV/O! #DIV/O! customers. Variable costs for this option are low compared to other options and has the to make ($) advantage of charging a premium for the shirts being custom and "made-to-order". you need to sell (units #DIV/O! #DIV/O! #DIV/O! This plan has the following costs and revenue associated: to make (S) Volume (units) : 80,000 you need to sell (units) #DIV/O! #DIV/O! #DIV/O! Selling Price Per unit: $35.00 Unit Variable Cost: $15.00 7 Break-even point [ in revenue] Fixed Costs:$1,200,000.00 Depreciation: $40,000 Regular break-even #DIV/O! #DIV/O! #DIV/O! Which Option would you choose for the short term? What about for the long term? Why? You may Input your answer below. 41 Cash break-even #DIV/O! #DIV/O! #DIV/O! 43 Profit objective to make O you need to sell #DIV/O! #DIV/O! #DIV/O! 46 to make O you need to sell #DIV/O! #DIV/O! #DIV/O! 48 to make you need to sell #DIV/O! #DIV/O! #DIV/O! BreakEvenContributionMargin