1. The Fashion Shoe Company operates a chain of womens shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the companys many outlets: Per Pair of Shoes Selling price $ 20.00 Variable expenses: Invoice cost $ 7.00 Sales commission 3.00 Total variable expenses $ 10.00 Annual Fixed expenses: Advertising $ 32,000 Rent 21,000 Salaries 105,000 Total fixed expenses $ 158,000 Problem 5-26 Part 3 3. If 15,200 pairs of shoes are sold in a year, what would be Shop 48s net operating income (loss)?

2

The Fashion Shoe Company operates a chain of womens shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary.

The following data pertains to Shop 48 and is typical of the companys many outlets:

		Per Pair of Shoes
Selling price		$	20.00
Variable expenses:
Invoice cost		$	7.00
Sales commission			3.00
Total variable expenses		$	10.00
			Annual
Fixed expenses:
Advertising		$	32,000
Rent			21,000
Salaries			105,000
Total fixed expenses		$	158,000

Problem 5-26 Part 4

4. The company is considering paying the Shop 48 store manager an incentive commission of 70 cents per pair of shoes (in addition to the salespersons commission). If this change is made, what will be the new break-even point in unit sales and dollar sales? (Do not round intermediate calculations. Round your final answers to the nearest whole number.)

3.

The Fashion Shoe Company operates a chain of womens shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary.

The following data pertains to Shop 48 and is typical of the companys many outlets:

		Per Pair of Shoes
Selling price		$	20.00
Variable expenses:
Invoice cost		$	7.00
Sales commission			3.00
Total variable expenses		$	10.00
			Annual
Fixed expenses:
Advertising		$	32,000
Rent			21,000
Salaries			105,000
Total fixed expenses		$	158,000

Problem 5-26 Part 5

5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 45 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating income (loss) if 18,400 pairs of shoes are sold? (Do not round intermediate calculations.)

3.