Problem 5-26 (Static) CVP Applications; Break-Even Analysis; Graphing [LO5-1, LO5-2, LO5-4, LO5-5]

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The Fashion Shoe Company operates a chain of womens shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary.

The following data pertains to Shop 48 and is typical of the companys many outlets:

	Per Pair of Shoes
Selling price	$ 30.00
Variable expenses:
Invoice cost	$ 13.50
Sales commission	4.50
Total variable expenses	$ 18.00

	Annual
Fixed expenses:
Advertising	$ 30,000
Rent	20,000
Salaries	100,000
Total fixed expenses	$ 150,000

Problem 5-26 (Static) Part 5

5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 50 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating income (loss) if 15,000 pairs of shoes are sold? (Do not round intermediate calculations.)