Question
Classical Glasses operates a local store, selling sunglasses for $50 each. Classical Glasses currently pays $1,500 a month to rent space and pays two full-time
Classical Glasses operates a local store, selling sunglasses for $50 each. Classical Glasses currently pays $1,500 a month to rent space and pays two full-time employees to each work 160 hours a month at $15 per hour. The store shares a manager with a neighboring store and pays 50% of the managers annual salary of $60,000 and benefits of $12,000. The wholesale cost of the sunglasses to the company is $12.50 a pair. 1. How many sunglasses does Classical Glasses need to sell each month to break even? 2. If Classical Glasses wants to earn an operating income of $5,700 per month, how many sunglasses does the store need to sell? 3. If the stores hourly employees agreed to a 15% sales-commission-only pay structure, instead of their hourly pay, how many sunglasses would Classical Glasses need to sell to earn an operating income of $5,700? 4. Assume Classical Glasses pays its employees hourly under the original pay structure but is able to pay the mall 10% of its monthly revenue instead of monthly rent. At what sales levels would Classical Glasses prefer to pay a fixed amount of monthly rent, and at what sales levels would it prefer to pay 10% of its monthly revenue as rent?
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