QUESTION 1 ( 25 marks) TT Company operates a chain of retail outlets selling wireless modems. The management of TT Company is trying to determine the viability of opening an outlet in Indonesia to tap into the Indonesian market. The expected revenue and cost information for the new store is as follows $400 Unit variable data (average) Selling price Manufacturing costs Sales commissions Total variable costs $240 $10 $250 Annual fixed costs Rent $15,000 Salaries $100,000 Selling and administrative costs $70,000 Other fixed costs $40,000 Total fixed costs $225.000 The new store is managed by an outlet supervisor who has a team of sales associates under his charge. The outlet supervisor is paid a fixed salary while the sales associates are paid fixed salaries and sales commissions. Required:(Each question is to be considered independently.) A) What is the annual breakeven point in terms of (1) units sold and (i) revenue? (3 marks) B) If 1,000 units are sold, what will be the operating profit (loss) of the store? (3 marks) C) If the outlet supervisor were paid $15 commission per unit in addition to his fixed salary, what would be the store's operating income if 2,200 units were sold (3 marks) D) The management is also considering a change in the salary plan for the sales associate. The current plan for sales associate is a fixed salary and sales commission. (1) If the sales associates were given a total increase of $31,000 in their fixed salaries with no sales commissions, what would be the annual breakeven point for the company in terms of units sold and sales revenue? (3 marks) (ii) At which sales level (in units) will the management be indifferent between the original salary plan (with the fixed salary and commission) and the new one with the increase in fixed salary of $31,000 and no sales commission)? (5 marks) (iii) Which salary plan should the management implement for the sales associates if sales level is forecasted to be 3,200 units? Show your working using the contribution margin income statements under the original salary plan and under new salary plan. (4 marks) (iv) Explain the significance of breakeven analysis and margin of safety to management base on the salary plan that you recommended in (1) and (iii) (4 marks)