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(15 min.) CVP analysis, international cost structure differences.

| | |Variable |Variable |

| |Annual |Manufacturing |Marketing & |

|Country |Fixed |Cost |Distribution Cost |

|  |Costs |per Sweater |per Sweater |

|Singapore |$ 6,500,000 |$ 8.00 |$11.00 |

|Thailand | 4,500,000 | 5.50 | 11.50 |

|United States |12,000,000 | 13.00 | 9.00 |

| | | | |

| | | | |

| | | | |

Thailand has the lowest breakeven point since it has both the lowest fixed costs ($4,500,000) and the lowest variable cost per unit ($17.00). Hence, for a given selling price, Thailand will always have a higher operating income (or a lower operating loss) than Singapore or the U.S.

The U.S. breakeven point is 1,200,000 units. Hence, with sales of only 800,000 units, it has an operating loss of $4,000,000.

3-27 (30 min.) Sales mix, new and upgrade customers.

1.

| |New |Upgrade |

| |Customers |Customers |

|SP |$210 |$120 |

|VCU |90 |40 |

|CMU |120 |80 |

The 60%/40% sales mix implies that, in each bundle, 3 units are sold to new customers and 2 units are sold to upgrade customers.

Contribution margin of the bundle = 3 × $120 + 2 × $80 = $360 + $160 = $520

Breakeven point in bundles = [pic]=...