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 fixed
- 1. How many jeans must Perfect Fit sell in order to break even?
Required
- 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.
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