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Q 5 ) The Liberty shoe company operates a chain of shoe stores. The stores sell 1 0 different styles of inexpensive men's shoes with

Q5) The Liberty shoe company operates a chain of shoe stores. The stores 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. Liberty is trying to determine whether to open another store, which is expected to have the following revenue and cost relationships: Unit variable data (per pair of shoe) Consider each sub-part independently: (a) What is the annual breakeven point in (i) units sold (ii) revenues? [2 marks](b) If 35,000 units are sold, what will be the store's operating income (loss)?/2 marks/(c) If Sales commission was discontinued for individual salespeople in favor of Rs.1,62,000 increase in fixed salaries, what would be the annual breakeven point in (i) units sold (ii) revenues? [2 marks](d) Refer to the original data. If the store manager were paid Rs.0.30 per unit sold in addition to his current fixed salary, what would be the annual breakeven point in (1) units sold (ii) revenues? 12 marks)(e) Refer to the original data. If the store manager were paid Rs.0.30 per unit sold in excess of the breakeven point, what would be store's operating income if 50,000 units were sold? (This Rs.0.30 is in addition to both the commission paid to sales staff and the store manager's fixed salary.)[2 marks](1) Suppose the target operating income is Rs.16,80,000. How many units must be sold to reach the target under (i) the fixed salary plan (ii) the fixed-salary-and-commission plan? 15 marks)

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