Reference no: EM133132252
Question - For this week's discussion, consider the following scenario and answer the two questions listed.
Sue Jones, a friend from ihigh school, owns a local business that specializes in supplying uniforms for sports teams and leagues. You have asked her to help you out with the pricing on jerseys for the new basketball team that you are starting Her current pricing and cost structure is as follows:
Team jerseys
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Sales (2,000 jerseys)
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$60,000
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30.00
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Variable cost
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45,000
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22.50
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Contribution Margin
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15,000
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7.50
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Fixed Costs
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5,000
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Net Income
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10,000
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In your budget for the new team, the price that you had included for each jersey was $25.00. You've had a conversation with Sue and she said she would get back to you this week with her answer. The total number of jerseys you need is 30.
After your conversation, Sue goes back and looks at her analysis for jerseys. She has been looking for new customers and has the capacity to fill the order.
1. If Sue agrees to the $25.00 selling price for your order, what is the impact on her bottom line? Based strictly on the financial analysis, should she accept your order?
2. Assuming the financial analysis shows that Sue's income will increase if she accepts the special order, what other qualitative factors (impact on other customers, reputation, pricing structure for the future, etc.) should she consider before saying yes to you?
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