Question No-1

Shirts unlimited operate a chain of shirt stores around the country. The stores carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary. The following worksheet contains cost and revenue data for store Mix & Match. These data are typical of the companys many outlets:

Particulars	Amount (Per unit)
Selling Price	TK. 45.00
Variable expenses:
Invoice Cost	16.00
Sales Commission	9.00
Total Variable Expenses	25.00
Fixed Expenses:
Rent	80000
Advertising	250000
Salaries	70000
Total Fixed Expenses	400000

Shirts unlimited are a fairly new organization. The company has asked you, as member of its planning group, to assist in some basic analysis of its stores and company policies.

Required:

1. Often the most direct route to a business decision is an incremental analysis. What is meant by an incremental analysis?
2. Calculate the annual breakeven point in TK. Sales and in unit sales for store Mix & Match (Use CM approach).
3. The company is considering paying the store manager of store Mix & Match an incentive commission of TK. 3 per shirt (in addition to the salespersons commissions). If this change is made, what will be the new breakeven point in TK. Sales and in unit sales for store Mix & Match (Use equation method)?
4. Refer to the original data. The company is considering eliminating sales commission entirely in its stores and increasing fixed salaries by Tk. 105000 annually. If this change is made, what will be the net operating or loss if 25000 units are sold in a year?