Case $2$

Walk$-$About Ltd operates a chain of shoe stores. The stores sell

ten different styles of inexpensive men's shoes with identical

unit costs and selling prices. A unit is defined as a pair of shoes.

Each store has a store manager who is paid a fixed salary.

Individual salespeople receive a fixed salary and a sales

commission. Walk$-$About is trying to determine the desirability

of opening another store, which is expected to have the

following revenue and cost relationships:

Per pair

Unit variable data

Selling price $30\mathrm{.}00$

Cost of shoes $19\mathrm{.}50$

Sales commissions $1\mathrm{.}50$

Total variable costs $21\mathrm{.}00$

Annual fixed costs

Rent $60000$

Salaries $200000$

Advertising $80000$

Other fixed costs $20000$

Total fixed costs $360000$

Required

$($Consider each question independently.$)$

$1$ What is the annual breakeven point in $($a$)$ units sold, and $($b$)$

revenues?

$2$ If $35000$ units are sold, what will be the store's operating

profit $($loss$)?$

$3$ If sales commissions were discontinued for individual

salespeople in favour of an $81000$ increase in fixed salaries,

what would be the annual breakeven point in $($a$)$ units sold, and

$($b$)$ revenues?

$4$ Refer to the original data. If the store manager were paid $0\mathrm{.}30$

per unit sold in addition to his current fixed salary, what would

be the annual breakeven point in $($a$)$ units sold, and $($b$)$

revenues?

$5$ Refer to the original data. If the store manager were paid $0\mathrm{.}30$

per unit commission on each unit sold in excess of the

breakeven point, what would be the store's operating profit if $50$

$000$

units were sold? $($This $0\mathrm{.}30$ is in addition to both the

commission paid to the sales staff and

the store manager's fixed salary.$)$