Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. Angie has just received a degree in business and she is anxious to apply the principles she has learned to her business. In time, she hopes to open a chain of sandal shops. As a first step, she has prepared the following analysis for her new store: Sales price per pair of sandals $ 2.00 Variable expense per pair of sandals 1.20 Contribution margin per pair of sandals $ 0.80 Fixed expense per year: Building rental $ 9,000 Equipment depreciation 5,000 Selling 17,600 Administrative 18,000 Total fixed expense $ 49,600 Required: 1. How many pairs of sandals must be sold each year to break even? What does this represent in total dollar sales?

3.	How many pairs of sandals must be sold to earn a $1,600 target profit for the first year?

5.	Refer to the original data. Actual operating results for the first year are as follows:

Sales (68,500 pairs)	$	137,000
Variable expenses		82,200
Contribution margin		54,800
Fixed expenses		49,600
Net operating income	$	5,200

a.	What is the stores degree of operating leverage? (Round your answer to 2 decimal places.)

b.	Angie is confident that with a more intense sales effort and with a more creative advertising program she can increase sales by 5% next year. What would be the expected percentage increase in net operating income? Use the degree of operating leverage concept to compute your answer. Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).