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Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat has approximately the same
Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople.
tableSales price,$ Bubba's Western Wear is a western hat retailer in Lubbock. Texas. Although Bubba's carries numerous styles of western hats, each hat
has approximately the same price and invoice purchase cost as shown in the following table. Sales personnel receive a commission
to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth
at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and
courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in
sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring
and training new salespeople.Per unit variable expensesSales convissions
Total per wnit variable costs
Total annual fixed expensesRentTotal fixed expensesRequired:
Calculate the annual breakeven point, both in terms of units and in terms of saies dollars.
If Bubba's sells hats, what is its beforetax income or loss? Support your answer by preparing a contribution income
statemient
If Bubba's sells hats, what is its margin of safety MOS in dollars and MOS ratio?
Bubba is considering the elimination of sales commissions completely and increasing salaries by $ annually. What would be
the new breakeven point in units? What would be the beforetax income or loss if hats are sold with the new salary plan?
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