BOW LTD. is a highly popular chain of rented tie shops in Dublin. The shops sell ten different styles of mens ties with identical purchase costs and selling prices. BOW LTD. is trying to determine the desirability of opening another shop in OConnell Street which would have the following expenses and revenue relationships:-

Euro

Selling price per tie 30.00

cost of tie 19.50

Salesmens commissions 1.50

Total variable costs 21.00

Annual Fixed Costs:

Rent 60,000

Salaries 200,000

Advertising 80,000

Other fixed costs 20,000

Total 360,000

CONSIDER EACH OF THE FOLLOWING QUESTIONS INDEPENDENTLY:-

1. What is the annual breakeven point in sales units and in sales revenue?

2. If 35,000 ties are sold, what will be the shops net profit / (loss)?

3. If the store manager is paid 30c per tie as commission, what would be the annual breakeven point in sales units and sales revenue?

4. Refer to the original data. If sales commissions were discontinued in favour of an 81,000 increase in fixed salaries, what would be the annual breakeven point in sales units and sales revenue?

5. Refer to the original data. If the store manager was paid 30c per tie as commission on each tie sold in excess of the breakeven point, what would be the shops net income if 50,000 ties were sold?