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These 3 questions: 4. If down increases by a certain percentage, will the selling price of a down-filled jacket need to change by that same
These 3 questions:
4. If down increases by a certain percentage, will the selling price of a down-filled jacket need to change by that same percentage to maintain the same profit margin? Explain.5. Assume that a Land’s End down jacket selling for $100 uses 12 ounces of down. Further assume that Lands’ End has $250,000 of fixed costs related to the down jacket line and its other variable manufacturing costs total $60 per jacket. As stated in the story, the cost per pound of down was $13 and $23 in October 2010 and October 2012, respectively. Calculate the breakeven number of jackets both in (a) October 2010; and (b) October 2012. Do these breakeven numbers agree with your answers to the prior questions?6. Assume now the same set of facts as in Question 5 but that Lands’ End raises the selling price of each jacket by $10 in October 2013. Does the contribution margin percentage remain the same?
