Your first job is to focus on the firm's inventory. The company is centered on solling the premium sweaters to college football fans through a website. Your analysis is important since a signiticant portion of the company's assets is the inventory thot if carries. The business is cyclic, and soles ore concentrated during the period leoding up to the college football season, which runs between late August and the end of each year. For the upcoming season, the firm wants to sell sweaters to only a few of the largest schools in the Midwest region of the United Stotes. in particular, it is torgeting Ohio Stote University (OSU), University of Michigan (UM), Michigan State University (MSU), Purdue University (PU), and indiana University (UU). These five schools heve major football programp ond a layol fan base. The lim has considered the idea of moking the sweaters in its own foctory, but for now it purchases them from a supplier in China. The prices are-great but service is a problem since the supplise has a 20 -week leod time for each order and the minimum order size is 5.000 sweaters. The order can consist of a mir of the different legos, weh as 2,000 for OSU, 1,500 for UM, 750 for MSU, 500 for PU, and 250 for IU. Wahin eoch logo sub lot sizes are aliocated based on percentoges Ja the supplier nuggests 20 percent x-large, 50 percent large, 20 percent medium, and 10 percent small based on its historical data. Once an order is received, a local tubcontractor applies the monograme and ships the sweoters to the customer. fhe subcontractor stores the inventory of sweaters tor the compary in a small waratouse area located of their site. This is the componys second yeor of operotion. Lost yedr, it sold sweoters for only thee of the schools, OSU, Mu, and PU. It ordered the minimum 5.000 sweoters and sold ail of them, but the experience was paintul becouse the compony hod too momy Mus sweoters and not enough for osu fans, tast yeor, it ordered 2.300 osu. 1,700 Mu. and 1,000 pu sweaters. Of the 5.000 sweaters. 336 had to be sold at a steep discount on etloy after the season. The company was hoping not to do this ogoin. For the next year, you have conlected gome dote relevant to the decision. fxhibit 1liz shows cost information for the product when purchased from the supplier in China Here we see that the cost for each sweater, defivered to the warehouse of our monograrming subcontractot, is $6 s 7. This price is valid for ny. quantity we ercler obcve 5,000 sweaters. This order can be a mix of sweaters for each of the five schooil we ore targeting. the supplier needs zo weeki to. process the order, se the ardier needs to be ploced around April I for the upcoming football season. Exhibit 11.12 COST INFOAMATION FOR THE BIG TEN SWEATERS *336 sweaters were sold through eBay for 346 ecch (the customer pays shipping on all ordors). "Calculated assuming the demand at ecch schoal is independent Our monogramming subcontractor gets $14.00 for each sweater. Shipping cost is paid by the customer when the order is placed. In oddition to the cost dato, you also have some demand informotion as shown in Exhibit lu3. The exact soles numbers for last year are given Sweaters sold at full retail price were sold for $127 eoch. Sweaters left cwer at the end of the season were sold through efay for $46 each and these sweaters were not monogrammed by our subcontroctor. Keep in mind that the retail sales numbers do not acturately 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 Ahondo is committed to using the same approoch used lost year. The firm ploced ods in the football program sold at each game. These worked very weit for reaching those attending the games, but she realized there may be ways to odvertise that may open sales to more alumnl. She has hired a market research firm to help identify other odvertising outlets but has decided to wait at least another year to try something cliflerent. forecosting demand is a major problem for the company. You have asked Rhondo and steve to predict what they thinksoles might be nevt year. You have asso asked the market research firm to apply their forecosting tooks batn on these forecasts are given in Exhibit II: ro genarate some statistics you have averoged the forecosts and caiculated the standard deviation for each school and in total. Alsed on odvice from the market research firm, you have deciched to use the oggregate demand forecast and standiard deviation for the oggregate demand The oggregate demand was colculated by odding the dveroge forecost for eoch item. The oggregate standatd deviation was calculated by squating the standard deviotion for each item (this is the variance), summing the variance for each item, and thentoking the square root of this surn, This assumes that the demand for eoch school is independent, meaning that the demand tor Ohio state is totoily unreloted to the demand ot Michigan and the other schooln, You will allocate your aggregate order to the individual schools based on their expected percentage of totel demand You discussed your andiysis with Rhondo and steve dand they are OK with your analysis. They would like to see what the ordor quantities would be it each school wos considered individually. You are curious as to how much Rhanda and Stowe made in their business iast year, You do not have all the data, but you know that most of their expenses relate to buying the swegters and having them monogrammed, You know they paid themselves $50,000 ecch and you know the rent, utilities, insurance, and a benefit packoge for the business was about $25,000 They are paying you $42,000 and you expect your benefit packoge oddition would be about $1,000 per year, Assurne that they order based on the aggregate torecast. 1. About how much do you think they made "before taves" last year? (before venture capital payments are made) (Round your answer to the nearest dollar amount) 2. Ater they moke theis (betore-tox) payment to the venture capital firm and then poy 50 percent income tax on the remaining amount, what was theit increase in cosh last year? (Round your answer to the nearest dollar amount) 3. How many sweaters should you ordor next yoar? Calculote this based on the aggregote forecast and also the forecast by individual school. (Round your answers to the nearest whole number.) 4. How miach do you think they made "before taxes" this year? (Round your intermediate calculation to nearest whole number. Round "Unit cost" to 2 decimal places and final answer to nearest dollar amount) 5. It they pay 50 percent in toxes and must make their payment to the venture copital firm what wat theif irverease in cash this year? (Round your intermediate calculation to nearest whole number, Round 'Unit Coot' to 2 decimal places and final answer to nearest dollar amount.) About how much do you think they made "before taxes" last year? (before venture capital payments are made) (Round your answer to the nearest dollar amount.) (1 mark) 2. After they make their (before-tax) payment to the venture capital firm and then pay 50 percent income tax on the remaining amount, what was their increase in cash last year? (Round your answer to the nearest dollar amount.) (1 mark) 3. How many sweaters should you order next year? Calculate this based on the aggregate forecast and also the forecast by individual school. (Round your answers to the nearest whole number.) (2 marks) 4. How much do you think they made "before taxes" this year? (Round your intermediate calculation to nearest whole number. Round "Unit Cost" to 2 decimal places and final answer to nearest dollar amount.) (1 mark) Expected pre-tax profit this year (\$) 5. If they pay 50 percent in taxes and must make their payment to the venture capital firm, what was their increase in cash this year? (Round your intermediate calculation to nearest whole number. Round "Unit Cost" to 2 decimal places and final answer to nearest dollar amount.) (1 mark)