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 | $ | 20.00 |
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Variable expenses: |
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Invoice cost | $ | 6.50 |
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Sales commission |
| 5.50 |
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Total variable expenses | $ | 12.00 |
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| Annual |
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Fixed expenses: |
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Advertising | $ | 42,000 |
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Rent |
| 32,000 |
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Salaries |
| 160,000 |
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Total fixed expenses | $ | 234,000 |
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| Refer to the original data. As an alternative to (4) above, the company is considering paying the 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 the shops net operating income or loss if 31,350 pairs of shoes are sold? (Do not round intermediate calculations.) |
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