Harrington

Submitted by :- Anvit Vyas Submitted to:- Ms. Mehak Bansal Subject:- Problem framing Date:- 19/03/2012 Pg- 20111213 Seminar Group 1 IILM, LR

Demand And Profitability Analysis of Harrington Collection

Start up Costs (in millions)

Start up Costs Pants Plant Start up costs Hoodie and Tee Shirt Plant Equipment Pants Plant Equipment Hoodie and T Shirt Launch PR- Advertising Fixtures For Company Stores Total Start Up Costs Annual Depreciated Start Up Costs (as depreciation rate is 20%) $ 1.2 $ 2.5 $2 $ 2.5 $2 $ 2.5 $ 12.70 $ 15.24

Annual Ongoing Operating Costs (in Millions)

Overhead Pants Plant Overhead Hoodie and Tee-shirt Plant Rent Pants Plant Rent Hoodie and Tee-shirt Plant Management/ Support Advertising Total Fixed Operating Cost $3 $ 3.5 $ 0.5 $ 0.5 $1 $3 $ 11.50

Direct Variable Costs ( in millions)

Sew and Press Cut Other Variable Labour Fabric Findings TOTAL

Hoodie

$ 3.25 $ 1.15 $ 3.20 $ 9.10 $ 3.85 $ 20.55

Tee-shirt

$ 2.00 $ 0.40 $ 2.40 $ 2.20 $ 0.50 $ 7.50

Pants

$2.85 $0.70 $3.05 $7.50 $2.30 $16.4

Direct Variable Costs translated into “Unit” cost:- (in millions) Hoodie

$ 20.55*0.5= 10.275

Tee-shirt

$ 7.50*1.5= 11.25

Pants

$ 16.4*1= 16.4

Indirect Variable Costs (in millions)

Wholesale unit price $ 95

Total Variable cost as % of wholesale Price 49.02 Indirect Variable Costs per Unit Direct variable costs per unit Indirect Variable costs per unit Total Variable Cost per unit CONTRIBUTION Wholesale price per unit Less total variable costs per unit Contribution per unit BREAKEVEN $ 95 $ 46.57 $ 48.43 $ 8.64 $37.925 $ 8.64 $ 46.57

Fixed annual costs( operating and depreciated start up) = $ 2.54+11.50= $ 14.04 Divided by contribution per unit = $ 48.43 Breakeven units = 0.26 PROFIT MARGINS Revenue $ 39.9 ( as double revenue, then 405 of it is in better section and c means 7% of this 40% share) Less fixed annual costs $ 14.04 Less Total Variable Costs Profit Before Tax = Profit Margin Before Tax Case Analysis Q1....