Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store:

Sales price per pair of sandals $ $32$

Variable expenses per pair of sandals $16$

Contribution margin per pair of sandals $ $16$

Fixed expenses per year:

Building rental $ $9,600$

Equipment depreciation $12,000$

Selling $9,600$

Administrative $16,800$

Total fixed expenses $ $48,000$

Problem $5-30($Algo$)$ Part $1$

Required:

$1.$ What is the break$-$even point in unit sales and dollar sales? Angie has decided that she must earn a profit of $$16,000$ the first year to justify her time and effort. How many pairs of sandals must be sold to attain this target profit? $4.$ Angie now has two salespersons working in the store$$one full time and one part time. It will cost her an additional $$7,000$ per year to convert the part$-$time position to a full$-$time position. Angie believes that the change would increase annual sales by $$41,600.$ Should she convert the position? Use the incremental approach. Refer to the original data. During the first year, the store sold only $3,500$ pairs of sandals and reported the following operating results:

Sales $(3,500$ pairs$)$ $ $112,000$

Variable expenses $56,000$

Contribution margin $56,000$

Fixed expenses $48,000$

Net operating income $ $8,000$

a$.$ What is the store$$s degree of operating leverage?

b$.$ Angie is confident that with a more intense sales effort and with a more creative advertising program she can increase unit sales by $50\%$ next year. Using the degree of operating leverage, what would be the expected percentage increase in net operating income if Angie is able to increase unit sales by $50\%?$