3-31 CVP analysis, international cost structure differences. Braided Rugs, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Portugal, and Thailand. All area rugs are to be sold to retail outlets in the United States for $250 per unit. These retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit (area rug) differ in the three countries. Variable Variable Manufacturing Cost per Area Rug Marketing & Distribution Cost Annual Sales Price Fixed to Retail Costs Outlets Country Portugal Italy per Area Rug $7,500,000 $45.00 $250.00 $10.00 5,000,000 65.00 250.00 15.00 9,000,000 55.00 250.00 Thailand 20.00 1. Compute the breakeven point for Braided Rugs, Inc., in each country in (a) units sold and (b) revenues. 2. If Braided Rugs, Inc., plans to produce and sell 80,000 rugs in 2017, what is the budgeted operating income for each of the three manufacturing locations? Comment on the results.
3-31 CVP analysis, international cost structure differences. Braided Rugs, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Portugal, and Thailand. All area rugs are to be sold to retail outlets in the United States for $250 per unit. These retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit (area rug) differ in the three countries. Variable Variable Manufacturing Cost per Area Rug Marketing & Distribution Cost Annual Sales Price Fixed to Retail Costs Outlets Country Portugal Italy per Area Rug $7,500,000 $45.00 $250.00 $10.00 5,000,000 65.00 250.00 15.00 9,000,000 55.00 250.00 Thailand 20.00 1. Compute the breakeven point for Braided Rugs, Inc., in each country in (a) units sold and (b) revenues. 2. If Braided Rugs, Inc., plans to produce and sell 80,000 rugs in 2017, what is the budgeted operating income for each of the three manufacturing locations? Comment on the results.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:3-31 CVP analysis, international cost structure differences. Braided Rugs, Inc., is considering three
possible countries for the sole manufacturing site of its newest area rug: Italy, Portugal, and Thailand. All
area rugs are to be sold to retail outlets in the United States for $250 per unit. These retail outlets add their
own markup when selling to final customers. Fixed costs and variable cost per unit (area rug) differ in the
three countries.
Variable
Variable
Manufacturing
Cost per
Area Rug
Marketing &
Distribution Cost
Annual
Sales Price
Fixed
to Retail
Costs
Outlets
Country
Portugal
Italy
per Area Rug
$7,500,000
$45.00
$250.00
$10.00
5,000,000
65.00
250.00
15.00
9,000,000
55.00
250.00
Thailand
20.00
1. Compute the breakeven point for Braided Rugs, Inc., in each country in (a) units sold and (b) revenues.
2. If Braided Rugs, Inc., plans to produce and sell 80,000 rugs in 2017, what is the budgeted operating
income for each of the three manufacturing locations? Comment on the results.
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