Payette High School Garments Case Study

● Expenses (costs associated with the production of revenues)

● Losses (from the sale of long-term assets below the original price paid by the company.)

Information from the income statement and the balance sheet are used to calculate financial ratios that are useful when making investment decisions.

Payette High School Designs constructs an annual profit and loss statement. Our fiscal year is from January 1-December 31. Our profit and loss statement shows that we have a very small return on sales (0.7%). This would be very concerning if we were a normal, for-profit business. We operate the business during the school day and use the excess time during our class period to learn about entrepreneurship, business operations, finances, and economics.

For example, adult garments sized small through extra-large can be purchased from the supplier for the same price. PHSD pays a premium price for extended sized garments and those costs are passed on to the customer. The prices of the garments are marked up on the pricing sheets several dollars. In some cases, the profit on the item is more than others. Extended sizes may receive a $2.00-$4.00 surcharge depending on the size. For example, if a customer were to order a size 2XL shirt, they would pay two additional dollars. The markup on a Gildan 2XL shirt is 57% while the markup on a Port and Company Shirt is 41%. Student managers are mindful of pricing analysis when recommending products. Certain products are preferred for consistency so inventory levels can be

Payette High School Designs is fortunate that many expenses are covered by the school district. Additionally, careful inventory control should allow the business to order what is needed for each customer order. This is not always possible because student managers attempt to forecast sales for spirit shirts. This year, too many items were ordered and there is an excess of inventory which needs to be moved. Breakeven analysis should be utilized going forward on orders such as these to determine how many items would need to be sold and at what price before the order is placed to determine if the order is