Barney´s operates in the high-end customized suit business

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Barney´s operates in the high-end customized suit business. The variable cost for producing one suit (including production cost, marketing cost, labor cost, etc.) is $65 per suit. Since Barney´s only maintains minimum showrooms, and does not own any retailing stores, the fixed rent and utilities cost is roughly 2 million dollars per year. Currently, the three largest mid-tier suit suppliers have variable costs and fixed costs as follows: ($20/suit, $6,000,000/year), ($30/suit, $5,000,000/year), ($35/suit, 4,500,000/year). The demand for mid-tier suits, overall, is 400,000 per year. Assume that every supplier has same market share

What is the maximum variable cost per suit that Barney´s  should have in order to be competitive in the mid-tier market?

 

 

Reference no: EM13830092

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