Beta Company sells blouses in Washington, USA. Blouses are imported from Pakistan and are sold to customers in Washington at a profit. Salespersons are paid basic salary plus a decent commission of $5 on each sale made by them. Selling price and expense data is given below:

Selling price per blouse $ 73.00

Variable expenses per blouse:

Invoice cost $ 25.00

Sales commission $ 5.00

Total Variable Expense: $ $31.00

Annual fixed expenses:

Rent $ $100,000

Marketing $ $175,000

Salaries $ $90,000

Total fixed expense $ $365,000

Required:

1. Compute the break-even point in units and in dollars using the information given above.
2. What would be net operating income or loss if company sells 18,500 blouses in a year?
3. If the manager is paid a commission of $2 blouse (in addition to the salespersons commission), what will be the effect on companys break-even point?
4. Refer to the original data. What will be the break-even point of the company if commission is entirely eliminated and salaries are increased by $100,000?
5. Discuss your observations on the bottom-line results and the break-even point as variable expenses are change versus when fixed expenses are changed.

[RN1]Should be $5 and not $14 See below where the amount is correct.