CPV Analysis Of Lululemon

considered normal for a well-established business. Lululemon's price earnings ratio tells us that there is increased growth and performance anticipated in the future.

Investment appraisal techniques

Making an investment towards a new project/product/company is hardly a simple process. Numerous factors including costs, benefits, time, and resources need to be taken into account before a decision to pursue a new project should be ventured into. At the end of the day prioritising projects and investing funds into projects that have the most potential towards favourable return on investment should be considered. Investment appraisal should not only be used for projects with a monetary return, it is also pertinent to use the tools where the return may not be easy to quantify such as training or development programs. Investment

BEP as an analysis which determines when total revenues equals total costs (fixed & variable). This analysis expresses the point when the organisation experiences no income or loss.

BEP calculation

The break-even point in units for Lululemon’s is the number of jackets that needs to be produced in order to cover the company's fixed and variable expenses.

Breakeven Point in Units = Fixed Costs/Price - Variable Costs

= 7,200,000/98– 50

= 150,000 units

Lululemon’s has to produce and sell 150,000 jackets in order to cover their total expenses, fixed and variable. At this level of sales, Lululemon’s will breakeven (profit = loss).

Contribution margin calculation

“Contribution margin measures how sales affects net income or profits.” (Holtzman, MP. 2016).

Contribution margin $ = Sales – Variable costs

= 14,700,000 – 7,500,000 = $7,200,000

Contribution margin Ratio = Contribution margin/Sales

= (7,200,000/14,700,000) x 100 = 48.98%

Alternatively:

Contribution margin unit = unit Price – unit variable cost

= $98-$50 = $48.00

Contribution margin Ratio = (48/98) x 100 =