Reference no: EM132804723

You are the operations manager at Zara, Lebanon. The Managing Director is about to introduce the 2011 summer collection for the three categories: Women, Kids and Men. She wants to be sure that these various categories are profitable (i.e. they reach breakeven point during the season). At a recent meeting, she asked you to develop a break-even analysis. Each category will be considered as one product. The estimated variable costs for each category are as follows: $150 for Women, $75 for Kids and $50 for Men. The expected marginal revenues as set by sales are: $350 for Women, $200 for Kids, and $150 for Men. Additional costs include the salaries for designers $40,000 for each category; rental space: 5,000 square meters manufacturing space per category at $6 per square meter. Based on a marketing study, the sales of Women, Kids and Men should account for 45%, 35% and 20% of total sales respectively.

a. What is your break-even point in dollars for all categories combined?

b. At breakeven what are the sales AND quantity sold for the women category?

c. Suppose you expect 90000 customers to visit your store in the coming season. What if each customer spends (on average) $100. How much (positive or negative) profit you will incur at the end of the season? Would you breakeven?