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    MEGHA AGGARWAL
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    This document summarizes the start-up costs, operating costs, sales, costs, and profits for a clothing company that manufactures pants, hoodies, and t-shirts. The total start-up costs are $12.7 million with annual depreciated costs of $2.54 million. With annual fixed costs of $14.04 million and a contribution per unit of $62.07, the company would need to sell 226,196 units to break even. The annual fixed operating costs are $11.5 million and projected annual sales are $46.2 million, which would yield a profit before tax of $12 million or 26% profit margin.

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    This document summarizes the start-up costs, operating costs, sales, costs, and profits for a clothing company that manufactures pants, hoodies, and t-shirts. The total start-up costs are $12.7 million with annual depreciated costs of $2.54 million. With annual fixed costs of $14.04 million and a contribution per unit of $62.07, the company would need to sell 226,196 units to break even. The annual fixed operating costs are $11.5 million and projected annual sales are $46.2 million, which would yield a profit before tax of $12 million or 26% profit margin.

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    4 views6 pages

    Start Up Costs

    Uploaded by

    MEGHA AGGARWAL
    This document summarizes the start-up costs, operating costs, sales, costs, and profits for a clothing company that manufactures pants, hoodies, and t-shirts. The total start-up costs are $12.7 million with annual depreciated costs of $2.54 million. With annual fixed costs of $14.04 million and a contribution per unit of $62.07, the company would need to sell 226,196 units to break even. The annual fixed operating costs are $11.5 million and projected annual sales are $46.2 million, which would yield a profit before tax of $12 million or 26% profit margin.

    Copyright:

    © All Rights Reserved
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    of 6

    Start Up Costs:

    Start-up Costs Pants Plant - $ 1.2 million


    Start-up Costs Hoodie and Tee-shirt Plant – $ 2.5 million
    Equipment Pants Plant – $ 2 million
    Equipment Hoodie and Tee-shirt Plant – $2.5 million
    Launch - PR, Advertising - $2 million
    Fixtures for Company Stores – 2.5 million
    Total Start-up Costs – $12.7 million
    Annual Depreciated Start-up Costs – $2.54 million

    Breakeven:
    Fixed annual costs (operating and depreciated start up) –
    $14.04 million
    ÷ Contribution per "unit" – $62.07
    = Breakeven Units - $226,196.23
    Annual Ongoing Operating Costs —Fixed:
    Overhead Pants Plant – $3 million
    Overhead Hoodie and Tee-shirt Plant – $3.5 million
    Rent Pants Plant – $ 500,000
    Rent Hoodie and Tee-shirt Plant - $ 500,000
    Management/Support - $1 million
    Advertising – $ 3 million
    Total Fixed Operating Costs - $ 11.5 million

    Profit Margin:
    Revenue – $46.2 million
    less fixed annual costs – $ 14.04 million
    less total variable costs – $20,130,600
    Profit before tax – $12,029,400
    Profit margin before tax – 26%
    Direct Variable Costs
    DVC Hoodie T-Shirt
    Sew & Press $3.25 $2.00
    Cut $1.15 $0.40
    Other Variable Labor $3.20 $2.40
    Fabric $9.10 $2.20
    Findings $3.85 $0.50
    Total $20.55 $7.50

    Direct variable costs translated into "unit" cost
    Hoodie T-shirt Pants
    $20.55 $7.50 $16.40
    x0.5 x1.5 x1
    $10.28 $11.25 $16.40
    Pants
    $2.85
    $0.70
    $3.05
    $7.50
    $2.30
    $16.40

    Pants
    $16.40
    x1
    $16.40
    Indirect variable costs:
    Wholesale "unit" price – $110
    Total variable costs as % of wholesale price – 9.09%
    Indirect variable costs per "unit" - $10 Contribution:
    Direct variable costs per "unit" – $ 37.93 Wholesale price per "unit" - $
    Indirect variable costs per "unit" – $10 less total variable costs per "
    Total variable costs per "unit" – $47.93 Contribution per "unit" – $62
    Contribution:
    Wholesale price per "unit" - $110
    less total variable costs per "unit" – $47.93
    Contribution per "unit" – $62.07

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