Reference no: EM132500828

TrailPacker is thinking of cutting costs by using a different fabric (raw material) supplier. Their variable material spelling is expected.

costs would decrease by 30% (only variable material costs - not all variable costs). The quality of the fabric is lower, so TrailPacker estimates that their additional fixed scrap costs related to the fabric quality would be $25,000 per month. They would not change the pricing of their backpacks.

Note: Use the initial data provided for all questions. Ignore the special sale and aluminum frame data from Parts 2 & 3.

Question A) a revised monthly Contribution Margin Income Statement to include the revenues, costs and profits of using the different raw material (fabric) supplier.

Question B) If their sales end up decreasing because of the change in quality, how much of a reduction in sales (dollars and units) could TrailPacker handle and still keep their net operating income the same as before the supplier change? Show your data in a Contribution Margin Income Statement.

Question C) a memo to the CFO that presents the pros and cons of the potential supplier change. Include the potential impacts on revenue, costs, and operating income, as well as any other factors or consequences of this decision. Be sure to include quantitative evidence and backup as well as any qualitative analysis.