The company sells a large variety of tee shirts and sweatshirts. The owner, is thinking of

The company sells a large variety of tee shirts and sweatshirts. The owner, is thinking of expanding his sales by hiring local high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school.

These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost He owner $10 each with a minimum order of 80 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 80.

Since the owner’s plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $15.00each.  The owner would pay the students a commission of $2.00 for each shirt sold.

Assume left over shirts have no value.

Required:

A.   
Assume that the venture is undertaken and an order is placed for 80 sweat shirts (at a cost of $10 per shirt). What would be he owner’s break-even point in units and in sales dollars? Show computations and explain the reasoning behind your answer.

B.    
What level of sales in units and in dollars would be required to reach the target net income of $1,200? Show all computations.

C.    
 Assume that the purchase cost of each sweatshirt increases to $11.00 while other conditions remain the same.  What level of sales in units and in dollars would now be required to reach a target net income of $1,200? Show all computations.