Part A

The Jeans Company is planning to introduce Brute$--$ a new jean product that is made from material that stretches but retains the traditional look of denim jeans. Projected cost for a pair of stretch denim jeans is $$5\mathrm{.}25$ in material and $$3\mathrm{.}75$ in labor. Overhead costs will total $$1,750,000$ per year, and marketing and administrative overhead costs will come to $$750,000$ per year. With a market potential of $700,000$ pairs for the year, the Marketing Manager is considering four different price alternatives: $$14\mathrm{.}25,$ $$16\mathrm{.}50,$ $$18\mathrm{.}75,$ and $$21\mathrm{.}25.$

The Marketing Manager$$s projections revealed the following price$-$volume relationship:

Price alternative Sales projection $($pairs of jeans$)$

$$14\mathrm{.}25600,000$

$$16\mathrm{.}50525,000$

$$18\mathrm{.}75375,000$

$$21\mathrm{.}25175,000$

$$

A$1.$ What is the Total Fixed Cost for the Jeans Company? $[4$ points$]$

Answer

A$2.$ What is the Unit Variable Cost of a pair of Brute jeans? $[4$ points$]$

Answer

A$3.$ What is the break$-$even point at a retail price of $$14\mathrm{.}25$ per pair of Brute jeans? $[4$ points$]$

Answer

A$4.$ The projected profits at a retail price of $ $21\mathrm{.}25$ per pair is $\_\_\_\_\_\_\_\_\_\_.[4$ points$]$

Answer

A$5.$ If the Jeans Company aims to maximize its profits, what should the retail price of Brute jeans be$?[4$ points$]$

Answer

A$6.$ Anticipating stiff competition in the market, the Jeans Company is considering offering its Brute jeans at a retail price of $$12\mathrm{.}50$ per pair. Would you recommend the retail price of $$12\mathrm{.}50$ to the Marketing Manager? Why or why not? $[4$ points$]$

Answer