Server Shirts sells blouses to hotels for their female servers. The blouses are imported from Italy and are sold to customers throughout the United States at a profit. Sales representatives are paid a base salary plus a commission on their sales. Sales and expenses data is provided below:

Selling price per blouse	$80.00
Variable Expenses per blouse:
Cost of blouse	$36.00
Sales Commission	$14.00
Annual Fixed Expenses
Rent	$160,000
Marketing	$300,000
Salaries	$140,000

Required:

What is the contribution margin per unit?

What is the contribution margin percentage?

Compute the number of units that need to be sold in order to break-even.

If the manager is paid a commission of $6 per blouse (in addition to the sales representatives commission) what will be the effect on the companys break-even? Will they need to sell more or less units?

As an alternative to #4 above, the company is thinking it will pay a $6 commission to the manager on each blouse sold in excess (or above) the break-even point. What will be the effect of these changes on the net operating income or loss of the company if 23,500 blouses are sold in a year? (Hint: You will need to calculate the profit at this volume under the current situation in order to compare to this alternative).

Refer to the original data. What will the break-even point if the company eliminates all commissions and instead increases salaries by $214,000? Should the company make this change?