Q1.Rose ltd. Sell matching. sets of shirts and ties to wholesalers at 9 each per set using sales staff who are rewarded on a fixed salary plus commission basis. The following forecasts have been made for the year ending 30th September 2020:

Purchase cost of matching set 5.00

Carriage inwards per matching set 2.00

Sales commission per set 0.50

Fixed expenses:

Sales personnel salaries 36,000

Other 18,600

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54,600

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The managing director is wondering whether to vary or eliminate commission and increase sales personnel salaries.

The managing director is wondering whether to vary or eliminate commission and increase sales personnel salaries.

She has asked you on the assumption that all monetary relationships would not vary except where specified to answer each of the following questions independently.

(a) If commission were increased to 0.60 per set, what increase in sales value and sales units would be necessary to break even?(30 marks)

(b) What would the profit or loss be, if,

(1) 36,000 sets were sold, or

(2) 56,000 sets were sold with each person receiving an extra 0.10 commission per set in excess of the break even point. (40 marks)

(c) If commission was eliminated and fixed salaries increased by 18,200 in total:

(1) What would the break even point be in sales value and sales units?

(2) How many units would need to be sold to achieve a target profit of 19,600?