Question
The Fashion Shoe Company operates a chain of womens shoe shops that carry many styles of shoes that are all sold at the same price.
The Fashion Shoe Company operates a chain of womens shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary.
The following data pertains to Shop 48 and is typical of the companys many outlets:
Per Pair of ShoesSelling price$ 40.00Variable expenses:Invoice cost$ 14.00Sales commission6.00Total variable expenses$ 20.00AnnualFixed expenses:Advertising$ 49,000Rent41,000Salaries195,000Total fixed expenses$ 285,000The company is considering paying the Shop 48 store manager 55 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating income (loss) if 17,050 pairs of shoes are sold?
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