Problem 1 (18 Points) The ABC Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men's shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual | salespeople receive a fixed salary and a sales commission. ABC is considering opening another store that is expected to have the revenue and cost relationships shown here. Unit Variable Data (per pair of shoes) Annual Fixed Costs Selling Price $ 60.00 Rent $ 30,000 Cost of Shoes 37.00 Salaries 100,000 Sales Commission 3.00 Advertising 40,000 Variable Cost per Unit 40.00 Other Fixed Costs 10,000 Total Fixed Costs $ 180,000 Consider each question independently. Show your calculations. Required: 1. What is the annual breakeven point in (a) units sold and (b) revenues? 2. If 8,000 units are sold, what will be the store's operating income (loss)? 3. If sales commissions are discontinued and fixed salaries are raised by a total of $15,500, what would be the annual breakeven point in (a) units sold and (b) revenues? 4. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $2.00 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues? 5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $2.00 per unit in excess of the breakeven point, what would be the store's operating income if 12,000 units were sold? 6. Explain operating leverage and its impact on profitability. When is it advantageous to shift compensation from a variable cost to a fixed cost?