Question

The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring 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 Hooper $17.00 each with a minimum order of 320 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 50.

Since Hooper’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 $34.00 each. Hooper would pay the students a commission of $8.00 for each shirt sold.

1. To make the project worthwhile, Hooper would require a $5,850 profit for the first three months of the venture. What level of unit sales and dollar sales would be required to reach this target net operating income? (Round your intermediate calculations to 2 decimal places.) Sales level in units sweatshirts Sales level in dollars

Answer 1

Answer:

$9 profit are made per unit sales.

650 unit sales should be made.

Explanation:

STEP1: What will be Hooper's profit in selling one sweatshirt.

Profit = selling price - cost price

Cost price includes all the expenses done.

Profit = $34 - ($8 + $17) = $9

Therefore Hooper will have $9 as profit if one student sales one sweatshirt.

STEP2: The Quantity of sweatshirt that Hooper needs to purchase in order to achieve his profit target.

Since he Target $5,850.

Therefore:

$5,850 ÷ $9 = 650 sweatshirt

Therefore;

If Hooper sales the sweatshirt at $34 per unit, he will achieve $9 as profit. And if he chooses to achieve $5,850 as profit, he has to place a one time order for 650 sweatshirt, that may arrive in batches.