Jw Sports Supplies (a)

3 Pages Posted: 5 Dec 2017 Last revised: 5 Nov 2020

See all articles by Luann J. Lynch

Luann J. Lynch

University of Virginia - Darden School of Business

Abstract

James Jones and William West started a company to make what they considered the ideal gym bag, one that would incorporate the features they both desired and that would be of a sufficient quality to withstand a regular workout schedule for several years. They each made a modest investment to start their new company—JW Sports Supplies—and began operating on the side while they continued their respective professional careers. In this case, the owners attempt to better understand the impact that alternative decisions they could make about managing costs, changing prices, and different sales volumes would have on the company, so that they could better determine whether pursuing their venture full time was even a possibility. They both agreed that if they could see annual profit climb to around $300,000, they would consider making this a full-time endeavor. The case focuses on concepts related to cost behavior and cost-volume-profit analysis.

Excerpt

UVA-C-2402

Rev. Feb. 6, 2020

JW Sports Supplies (A)

James Jones and William West had worked out together almost daily for several years. Both were professionals pursuing demanding careers, and both saw exercise as an escape from the daily stresses of the workplace. While they continued to update their workout wardrobes to take advantage of the latest in apparel technology, they lamented the lack of the perfect gym bag each time they met at the gym. One day, it was that lack of good storage space for their sneakers; the next, it was the lack of a pocket to conveniently store their phones, keys, and other small necessities; and finally, it was the problem of the seams splitting far beyond what one would consider normal wear and tear. Jones and West were sure they couldn't be the only ones who found current gym bags inadequate in meeting their needs. Eventually, they decided to pursue a venture to make what they considered the ideal gym bag, one that would incorporate the features they both desired and that would be of a sufficient quality to withstand a regular workout schedule for several years. They each made a modest investment to start their new company—JW Sports Supplies—and began operating on the side while they continued their respective professional careers.

That had been more than five years ago. The company had grown substantially, had achieved annual sales of over $ 1.5 million, and had begun to generate a healthy profit (Exhibit 1 provides an income statement for the most recent year of operation). As Jones and West reflected on their success to date, they contemplated what might be possible if they could devote themselves full time to JW Sports Supplies. They decided to dive deeper into the numbers. They wanted to better understand the impact that alternative decisions they could make about managing costs, changing prices, and different sales volumes would have on the company, so that they could better determine whether pursuing their venture full time was even a possibility. They both agreed that if they could see annual profit climb to around $ 300,000, they would consider making this a full-time endeavor.

. . .

Keywords: cost behavior, variable costs, fixed costs, mixed costs, contribution margin, income statements, manufacturing

Suggested Citation

Lynch, Luann J., Jw Sports Supplies (a). Darden Case No. UVA-C-2402, Available at SSRN: https://ssrn.com/abstract=3081128

Luann J. Lynch (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

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