Famous Footwear is a store that specializes in shoes targeted to people who lead an "active life." The Chicago mega-store has a special area called the "Locker Room" that is dedicated to shoes for various sports and activities like jogging, tennis, and basketball. Budgeted profit for the Locker Room is computed using an average cost of $44 per pair of shoes and an average selling price of $80 per pair of shoes.

The manager of the Locker Room has considerable discretion in setting prices and in staffing the area. Typically, the Locker Room is staffed for 700 hours per month at a budgeted wage rate of $5 per hour. In addition to this base wage, sales staff receives a commission equal to 5% of revenues. Moreover, staffing levels are not expected to change in response to "small" (defined as 10%) changes in shoe sales. For October, the Locker Room had budgeted sales of 4,000 pairs of shoes and 700 staffing hours.