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 substantial commission on each pair of shoes sold (in addition to a small base salary) in order to encourage them to be aggressive in their sales efforts. |
The following worksheet contains cost and revenue data for Shop 48 and is typical of the companys many outlets: |
Per Pair of Shoes | |||
Selling price | $ | 30.00 | |
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Variable expenses: | |||
Invoice cost | $ | 9.50 | |
Sales commission | 5.50 | ||
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Total variable expenses | $ | 15.00 | |
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Annual | |||
Fixed expenses: | |||
Advertising | $ | 58,000 | |
Rent | 37,000 | ||
Salaries | 190,000 | ||
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Total fixed expenses | $ | 285,000 | |
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2. | If 18,500 pairs of shoes are sold in a year, what would be Shop 48s net operating income or loss? |
4. | Refer to the original data. The company is considering eliminating sales commissions entirely in its shops and increasing fixed salaries by $30,700 annually. |
a. | If this change is made, what will be the new break-even point in unit sales and in dollar sales for Shop 48? (Do not round intermediate calculations.) |
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