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 $ 30.00

Variable expenses:

Invoice cost $ 9.50

Sales commission 5.50

Total variable expenses $ 15.00

Annual

Fixed expenses: Advertising $ 58,000

Rent 37,000

Salaries 190,000

Total fixed expenses $ 285,000

3. If 18,500 pairs of shoes are sold in a year, what would be Shop 48s net operating income (loss)?

4. The company is considering paying the Shop 48 store manager an incentive commission of 75 cents per pair of shoes (in addition to the salespersons commission). If this change is made, what will be the new break-even point in unit sales and dollar sales? (Do not round intermediate calculations. Round "New break-even point in unit sales" up to the nearest whole unit and round "New break-even point in dollar sales" to the nearest whole dollar.)

5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 50 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 21,700 pairs of shoes are sold? (Do not round intermediate calculations.)

6. Refer to the original data. The company is considering eliminating sales commissions entirely in its shops and increasing fixed salaries by $30,700 annually. If this change is made, what will be Shop 48's new break-even point in unit sales and dollar sales? (Do not round intermediate calculations.)