Jimmy has recently opened Shoes Store specializing in sportshoes. Jimmy has just completed a course in managerial accounting, and he believes that he can apply certain aspects of the course to his business. He is particualrly interested in adopting the cost-volume-profit (CVP) approach to decision making. Thus, he has prepared the following analysis:

Sales price per pair of shoes$72 Variable expense per pair of shoes$53 Contribution margin per pair of shoes $19 Fixed expense per year:

Building rental$15,000

Equipment depreciation$ 5,000

Selling$33,000

Administrative$17,000

Total fixed expense$70,000

Required:

1.How many pairs of shoes must be sold to break even? What does this represent in total dollar sales? (6 mark)

2.How many pairs of shoes must be sold to earn a $12,500 target profit for the first year? (7 mark)

3.Jimmy now has one full-time and one part-time sales-person working in the store. It will cost him an additional $11,000 per year to convert the part- time position to a full-time position. Jimmy believes that the change would bring in an additional $14,500 in sales each year. Should he convert the position? Use the incremental approach. (7 mark)