Question
Start-up costs were $1,000: sewing machine ($500), decorative supplies ($300), professional grade glue gun ($100), and 100 pairs of plain slides ($1/pair). Due to the
Start-up costs were $1,000: sewing machine ($500), decorative supplies ($300), professional grade glue gun ($100), and 100 pairs of plain slides ($1/pair). Due to the seasonal nature of demand, Sophia likes to have approximately 20 decorated pairs in inventory, in order to meet rush orders. SS's are customized slides, sold online. They have been relatively popular with $10,000 in sales last year. Sophia estimates sales will grow by 8% this year. The average selling price per pair is $10. The low frill pairs sell for $8 (Number of units is approximately 35% of pairs sold). Highly decorated pairs sell for $20 (number of units is also approximately 65% of pairs sold). Cost of materials for embellishing and customizing the flip-flops range from $2.50 - $8.00 per pair. Sophia estimates it takes her 30-90 minutes (.5 - 1.5 hours) to decorate one pair, depending on the complexity of the design. She isn't sure what value to assign to an hour of her labor. Shipping is paid for by the customer, if needed. Transactions are PayPal only. The website and PayPal fees are $100 per month. Taxes have not been filed since Sophia started this as a hobby. What is the Contribution Margin per unit (consider the differences between low-frill and highly decorated pairs)? What is the breakeven in units assuming all the SS's are low frills? Be sure to include assumptions youve made in the analysis. What is the multi-product breakeven in units? Be sure to include assumptions youve made in the analysis.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started