Exhibit

Classic Knitwear Quantitative Analysis

Part I. Break-even volume = fixed cost / contribution

The first step is to calculate the total fixed cost of the marketing program:
Fixed Costs of 2-Year Marketing Program Remarks
Retail displays (10,000 x $100) $ 1,000,000 Case p. 5, paragraph 4
Advertising $ 1,200,000 Case, p. 6, paragraph 2
Additional Salespeople (3 for 2 years) $ 510,000 Case, p. 6, paragraph 1
Fixed Cost of Marketing Program $ 2,710,000

The second step is to calculate the contribution per unit:

Contribution per Unit (Selling Price per Shirt - Variable Cost per Shirt)
Average manufacturer selling price per shirt $ 17.87 Exhibit 4, singles
Less: Average cost of goods sold $ (10.82) Exhibit 4, singles
Less: Invoice Allowance (5% of MSP) $ (0.89) Case, p. 6, paragraph 3
Less: Advertising Allowance (10% of MSP, 20% qualify) $ (0.04) Case, p. 6, paragraph 3
Less: Royalty Payments (5% of MSP less allowances) $ (0.89) Exhibit 3, paragraph 2
Contribution per shirt $ 5.22

Break-even volume can then be calculated as:

Break-even volume 518882 Shirts

Part II. Demand Analysis

Target audience 100,000,000 Case, p. 6, paragraph 2

Average awareness for the two-year period 12.5% Case, p. 6, paragraph 2
Interested males 18.5% Case, p. 5, paragraph 1
Definitely would buy/try 60.0% Exhibit 2/Case, p. 5, paragraph 2

First year "triers" purchasing an additional shirt in year 2 50%

Total Estimated Demand over 2-Year Period 2,081,250

Exhibit 2: Profit and Loss Forecasts for Clean Edge Under Niche and Mainstream Scenarios ($ in Millions)

Source of data
1 Unit sales - Razors Exhibit 7
2 Dollar sales - Razors (1) * manuf price (Exhibit 7)
3 Unit sales - Cartridges Exhibit 7
4 Dollar sales - Cartridges (3) * manuf price (Exhibit 7)
5 Total dollar sales (2) + (4)

6 Production costs Razors (1) * prod cost (Exhibit 7)

7 Production costs Cartridges (3) * prod cost (Exhibit 7)
8 Capacity costs Capacity costs from Exhibit 7
9 Advertising and Promotion Exhibit 7
10 Total costs (6) + (7) + (8) + (9)

11 Operating Profit (5) - (10)

12 Profits as % of sales (11)/(5)
13 Cost of cannibalization - Razors (a)
14 Cost of cannibalization - Cartridges (a)
15 Profit after cannibalization (11) - (13) - (14)

(a) Cannibalization cost = % cannibalization from Avail and Pro (5th paragraph in case under Positioning heading) *
where the contribution per unit average for Avail and Pro is $1.76 for razors and $2.80 for cartridges (case footno
Assumes cannibalization of 35% for Niche, 60% for Mainstream
ainstream Scenarios ($ in Millions)

Niche Mainstream
Year 1 Year 2 Year 1 Year 2
1000000.0 1500000 3300000 4000000
$ 9,090,000.00 $ 13,635,000.00 $ 25,839,000.00 $ 31,320,000.00
4000000.0 10000000 9900000 21900000
$ 29,400,000.00 $ 73,500,000.00 $ 61,578,000.00 $ 136,218,000.00
$ 38,490,000.00 $ 87,135,000.00 $ 87,417,000.00 $ 167,538,000.00

$ 5,000,000.00 $ 7,500,000.00 $ 15,642,000.00 $ 18,960,000.00

$ 9,720,000.00 $ 24,300,000.00 $ 22,176,000.00 $ 49,056,000.00
$ 610,000.00 $ 870,000.00 $ 1,710,000.00 $ 2,450,000.00
$ 15,000,000.00 $ 16,000,000.00 $ 42,000,000.00 $ 39,000,000.00
$ 30,330,000.00 $ 48,670,000.00 $ 81,528,000.00 $ 109,466,000.00

$ 8,160,000.00 $ 38,465,000.00 $ 5,889,000.00 $ 58,072,000.00

21% 44% 7% 35%
$ 616,000.00 $ 924,000.00 $ 3,484,800.00 $ 4,224,000.00
$ 3,920,000.00 $ 9,800,000.00 $ 16,632,000.00 $ 36,792,000.00
$ 3,624,000.00 $ 27,741,000.00 $ (14,227,800.00) $ 17,056,000.00

ph in case under Positioning heading) * unit sales * contribution per unit

ors and $2.80 for cartridges (case footnote 2 under Company Overview heading)