Calculating the Projected Demand:

2016 2017
Retail store sales (12 stores x 8 bags x 2 seasons) 192 150% of 192 = 288
Online sale 24 150% of 24 = 36
Total Projected Demand 216 324

Calculating Desired Design Volume:

Particulars Numbers
Number of designs desired 5
Number of colors per design 4
Number of style seasons 2
Total number of desired design volumes per year 40

Calculating Minimum Orders in a year:

Local Overseas
Desired design volumes per year 40 40
Minimum order quantity per design 10 50
Total minimum order requirements per year 400 2,000

Calculating Excess Orders:

Local Manufacturer Overseas Manufacturer
2016 2017 2016 2017
Minimum order 400 400 2,000 2,000
Sale 216 324 216 324
Excess Orders 184 76 1,784 1,676
Discounts (5% of cost) $6 $6 $4 $4
Loss on sale at below cost $1,104 $456 $7,136 $6,704
Calculating Contribution Margin (per unit) for 2016:
Local Manufacturer Overseas Manufacturer
Retail Store Online Retail Store Online
Sales Price $ 198 $ 440 $ 198 $ 440
Production Cost 120 120 80 80
Contribution Margin $78 $320 $118 $360

Contribution Margin Ratio 39.39% 72.73% 59.60% 81.82%

Total Contribution Margin for 2016 and 2017:

Local Manufacturers Overseas Manufacturers
2016 2017 2016 2017
R O R O R O R O
Selling Price 198 440 198 440 198 440 198 440
Cost 120 120 120 120 80 80 80 80
CM (unit) 78 320 78 320 118 360 118 360

Demand 192 24 288 36 192 24 288 36

Total CM Projected 14,976 7,680 22,464 11,520 22,656 8,640 33,984 12,960

Total CM 22,656 33,984 31,296 46,944

Calculate Projected Margins for 2016 and 2017 after accounting for the loss:
Local Overseas
Contribution margins for 2016 and 2017 56,640 78,240
Loss on sale at below cost for 2016 and 2017 (1,560) (13,840)
Net Contribution margins for 2016 and 2017 55,080 64,400