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 nding the management of certain aspects ofthe business more difficult. such as restocking inventory and hiring and training new salespeople. Sales price $ 80.00 Per unit variable expenses Purchase cost 34.50 Sales commissions 20.50 Total per unit variable costs $ 55-00 Total annual fixed expenses Advertising $ 137,500 Rent 1 9.3 ,. 0 0 0 Salaries 306,250 Total fixed expenses $ 836,?50 Required: 1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars. 2. If Bubba's sells 28,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income statement. 3. If Bubba's sells 41,000 hats, what is its margin of safety (MOS) in dollars and M08 ratio? 4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $234,625 annually. |I.r'I.ihatwould be the new breakeyen point in units? What would be the before-tax income or loss if28,000 hats are sold with the new salary plan? If Bubba's sells 28,000 hats, What Is Its before-tax Income or loss? Support your answer by preparing a contribution Income statement. m Sales 0 $ 2.240.000 0 Less: Variable costs 0 1.540.000 0 Contribution margin 0 $ r00.000 Less: Fixed costs a 20.000 9 Operating income a $ 672.000 If Bubba's sells 41,000 hats, what is its margin of safety (MOS) in dollars and MOS ratio? (Round "MOS ratio" answer to 1 decimal place.) Margin of safety (MOS) in dollars $ 13,530 X MOS ratio 33.0 %Bubba is considering the elimination of sales Required 4 .Jns completely and increasing salaries by $234,625 annually. What would be the new breakeven point in units? What would be the before-tax income or loss if 28,000 hats are sold with the new salary plan? (Do not round intermediate calculations.) New breakeven point in units 5,772 X Before-tax income or loss $ 1,011,375 X