Cost-volume-profit analysis for a company (Value 50 points)

Instructions:

Sun Sports Inc. has several kiosks in large and medium-sized shopping 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 work hard and are proactive in sales. The following cost and sales price information is representative of each of the kiosks individually.

Data per cap Sale price $35.00 Variable costs Cost per hat $12.00 Sales Commission $3.50 Total variable cost $15.50 Annual cost Fixed costs salaries $41,000 Kiosk rental $30,000 Advertising $56,000 Total fixed costs $127,000

The company wants to review its policies and give additional incentives to reinforce sales. Provide management with the following analysis of their stores: 1. Calculate the break-even point in units and sales dollars of a kiosk. (10 points) 2. Prepare a cost-volume-profit graph showing the revenues and costs of a kiosk from 0 to 30,000 hats and the break-even point. (5 points) 3. Present the net operating results (net profit or loss) if 9,000 hats are sold per year. (10 points) 4. The company is considering offering a commission of $1.50 per hat sold to the kiosk supervisor (in addition to sales commissions paid to kiosk vendors). Determine the new break-even point in sales dollars and units sold if this commission is added. (5 points) 5. Instead of the previous $1.50 commission per hat sold, another alternative that the company wants to evaluate is to offer the supervisor only $1.50 for each hat sold in excess of the break-even point. If only this commission is applied, what would be the net operating income (net profit or loss) if 12,000 hats are sold per year? (10 points) 6. Another third alternative, instead of the previous ones, is to completely eliminate sales commissions and increase fixed salaries by an additional $17,000 annually. to. Presents the break-even point in dollars and sales units for this alternative. (5 points) b. Explain whether or not you would recommend this alternative and why. (5 points)