The Minnie Hoodie Co. sells hoodies for children at a discounted price of $12. The fixed cost amounting to $130,000 a year. The average cost per hoodie is almost $5, and Minnie hoodie has other variable cost of $1 per unit. They aim to sell 35000 units in next year as per the estimated sale of last year.

1. Find the number of hoodies they need to sell in order to breakeven.

2. Calculate the Degree of operating leverage if firm is selling 25% more than its breakeven quantity.

Due to fierce completion in market Minnie hoodie is considering an alternative strategy to lower the selling price by $2 per unit. They are considering to lower the selling price to $10 per hoodie. For this purpose they have negotiated with the supplier for a 10% discount on hoodies they buy from them. There will be no change in fixed cost ($130000) and other variable cost ($1).

2. Now find out the effect of changes on Break even quantity.

3. Find out the difference of change in number of units on degree of operation leverage.

4. Calculate the difference in breakeven quantity and degree of operating leverage and interpret your results