Guido's Footwear retails running shoes for thirty dollars per pair. Guido's Footwear spends eleven hundred dollars a month in rent and pays two full-time employees to each work one hundred and sixty hours a month at rate of ten dollars per hour. The store shares a manager with a neighbouring company and pays 50% of the manager's annual salary of $60,000 and provides additional compensation in the form of bonus and benefits of $12,100. The company can source their shoes from a low-cost producer and only pays them $10 each due to the manufacturing facilities residing in a low-cost geography.

Required

1. To break even each month, how many running shoes does Guido's Footwear need to sell?

2. Guido's Footwear needs to earn an operating income of $3,500 per month, how many running shoes do they need to sell?

3. The store's hourly employees agreed to a fifteen percent sales-commission-only pay structure, instead of their hourly pay, how many running shoes would Guido's Footwear need to sell to earn an operating income of $5,300?

4. If Guido's Footwear 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 Guido's Footwear 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?

5. Why do you think it is important for companies to know their break-even point, and to conduct sensitivity analysis?