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 Shoes | |
---|---|
Selling price | $ 40.00 |
Variable expenses: | |
Invoice cost | $ 19.50 |
Sales commission | 4.50 |
Total variable expenses | $ 24.00 |
Annual | |
---|---|
Fixed expenses: | |
Advertising | $ 38,000 |
Rent | 28,000 |
Salaries | 140,000 |
Total fixed expenses | $ 206,000 |
6. Refer to the original data. The company is considering eliminating sales commissions entirely in its shops and increasing fixed salaries by $31,800 annually. If this change is made, what will be Shop 48's new break-even point in unit sales and dollar sales?
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