CVP analysis, sensitivity analysis. Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $50 with $35 in variable costs of goods sold. The company has xed manufacturing costs of $2,250,000 and xed marketing costs of $250,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 20%. 1. How many jeans must Perfect Fit sell in order to break even?2. How many jeans must the company sell in order to reach:a. a target operating income of $420,000?b. a net income of $420,000?3. How many jeans would Perfect Fit have to sell to earn the net income in requirement 2b if: (Considereach requirement independently.)a. the contribution margin per unit increases by 10%.b. the selling price is increased to $51.50.c. the company outsources manufacturing to an overseas company increasing variable costs perunit by $2.00 and saving 70% of fixed manufacturing costs.Required

Answered: 1. How many jeans must Perfect Fit sell…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

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CVP analysis, sensitivity analysis. Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $50 with $35 in variable costs of goods sold. The company has xed manufacturing costs of $2,250,000 and xed marketing costs of $250,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 20%.

1. How many jeans must Perfect Fit sell in order to break even?
2. How many jeans must the company sell in order to reach:
a. a target operating income of $420,000?
b. a net income of $420,000?
3. How many jeans would Perfect Fit have to sell to earn the net income in requirement 2b if: (Consider
each requirement independently.)
a. the contribution margin per unit increases by 10%.
b. the selling price is increased to $51.50.
c. the company outsources manufacturing to an overseas company increasing variable costs per
unit by $2.00 and saving 70% of fixed manufacturing costs.
Required

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