Text Box: Breakeven Analysis at Great Threads The Great Threads Company sells hand-knit sweaters. Great Threads is planning to print a catalog of its products and undertake a direct mail campaign. The cost of printing the catalog is $20,000 plus $0.10 per catalog. The cost of mailing each catalog (including postage, order forms, and buying of names from a mail-order database) is $0.15. In addition, the company will include direct reply envelopes in its mailings. It incurs $0.20 in extra costs for each direct mail envelope that is used by a respondent. The average size of a customer order is $40, and the company's variable cost per order (due primarily to labor and material costs) averages arround 80% of the order's value. The company plans to mail 100,000 catalogs. It wants to develop a spreadsheet model to answer the following questions: 1. How does a change in the response rate affect profit? 2. For what response rate does the company break even? 3. If the company estimates a response rate of 3%, should it proceed with the mailing? 4. How does the presence of uncertainty affect the usefulness of the model?