Cost-volume-profit analysis for a company

Instructions:

Sun Sports Inc. has several kiosks in large and medium-sized malls that sell various styles of men's and women's sports hats, all at the same price. In addition to the regular salary, the company pays a good commission to its salespeople so that they are diligent and proactive in sales. The following selling price and cost information is representative of each of the kiosks individually.

	Data per hat
Sale Price	$25
Variable costs
Cost per hat	$11
Salews commission	$3.75
Total variable cost	$14.75
	Anual Cost
Fixed Costs Wages	$37,000
Kiosk rental	$26,000
Advertising	$52,000
Total fixed costs	$115,000

The company wants to review its policies and provide additional incentives to boost sales. Provides management with the following analysis of its stores:

1. Find the breakeven point in units and dollars of sale of a kiosk.

2. Prepare a cost-volume-profit graph that shows the revenues and costs of a kiosk from 0 to 30,000 hats and the breakeven point.

3. Present the net operating results (net profit or loss) if 9,000 hats are sold per year.

4. The company is evaluating the possibility of offering a commission of $ 1.50 per hat sold to the kiosk supervisor (in addition to sales commissions paid to vendors at the kiosk). Determine the new breakeven point in sales dollars and units sold if this commission is added.

5. Instead of the commission of $ 1.50 per hat sold above, another alternative that the company wishes to evaluate is to offer the supervisor only $ 1.50 for each hat sold in excess of the breakeven point. If only this commission is applied, what would the net operating result (net profit or loss) be if 12,000 hats are sold per year?

6. Another third alternative, instead of the previous one is to eliminate sales commissions entirely and increase fixed salaries by an additional $ 23,500 annually. a. presents the breakeven point in dollars and sales units for this alternative. b. Explain whether or not you would recommend this alternative and why.