FRANK owns a chain of leased stores. These stores sell ten styles of men's shoes with identical costs and selling prices. FRANK is trying to determine if it is time to open another store.

The expenses and revenues are as follows:

Selling price per pair of shoes $50.00

Unit variable costs:

- Cost of purchasing shoes $39.50 - Salesperson's commission 1.50 Total variable costs $41.00

Annual Fixed Expenses: Rent $60,000 Salaries $200,000 Advertising 80,000 Other fixed expenses $20,000 360 000 $

Questions:

1. Calculate the contribution margin or marginal contribution and the expected net profit. (FRANK expects to sell 50,000 pairs of shoes in the first year)

2. Calculate the break-even point in sales dollars and units sold.

3. Calculate the margin of safety in dollars and units.

4. a) If salespeople received $0.30 more in commissions per pair of shoes sold, what would be the break-even point in dollars of sales and units sold?

b) Do the same work assuming instead that the selling price decreased by $0.30

5. Let's refer back to the baseline data. If the sales commission were converted into a fixed salary increase of $81,000 per year, what would be the break-even point in dollars and units sold? How many additional units would be needed to cover the increase in fixed costs?

6. What will be the accounting profit (or net loss) of the store if (1) 60,000 pairs of shoes were sold (2) 70,000 pairs of shoes were sold.