Question
Slip Shod Ltd has provided the following production and sales information for each pair of it's dress shoes: Direct materials $ 22 Direct labour 35
Slip Shod Ltd has provided the following production and sales information for each pair of it's dress shoes:
Direct materials $ 22
Direct labour 35
Variable factory overhead 15
Selling price 180
Sales commission 10% of the selling price
The fixed costs for the period are $1125000.
Required:
a. Calculate the break even point
b. Calculate the number of pairs that must be sold to achieve a profit of $63000. What is the margin of safety at this sales level?
c. Would it be better to sell 16000 pairs at a selling price of $180 each or 19000 pairs at a selling price of $160?
d.If an additional $63270 is spent on fixed advertising costs, what level of dollar sales must be attained to earn a new profit of $36000? Assume that there has been no change in the sales price.
e. Assume an income tax rate is 30%. Using the given information, how many pairs of shoes need to be sold to earn an after tax profit of $37800.
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