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The Following are financial information of a jewelry shop: Exhibit 1 Hallstead Jewelers; Income Statements for Years Ended January 31 (thousands of dollars) 2003 2004
The Following are financial information of a jewelry shop: Exhibit 1 Hallstead Jewelers; Income Statements for Years Ended January 31 (thousands of dollars) | |||
2003 | 2004 | 2006 | |
Sales | $8,583 | $8,102 | $10,711 |
Cost of goods sold | 4,326 | 4,132 | 5,570 |
Gross margin | $4,257 | $3,970 | $5,141 |
Expenses | |||
Selling expense | |||
Salaries | 2,021 | 2,081 | 3,215 |
Commissions | 429 | 405 | 536 |
Advertising | 254 | 250 | 257 |
Administrative expenses | 418 | 425 | 435 |
Rent | 420 | 420 | 840 |
Depreciation | 84 | 84 | 142 |
Miscellaneous expenses | 53 | 93 | 122 |
Total expenses | $3,679 | $3,758 | $5,547 |
Net income | $ 578 | $ 212 | $ (406) |
Exhibit 2 Hallstead Jewelers Operating Statistics | |||
2003 | 2004 | 2006 | |
Sales space (square feet) | 10,230 | 10,230 | 15,280 |
Sales per square foot | $839 | $792 | $701 |
Sales tickets | 5,341 | 5,316 | 6,897 |
Average sales ticket | $1,607 | $1,524 | $1,553 |
1. How much would the average sales ticket have to increaase to breakeven if the fixed cost remained the same in 2007 as it was in 2008? What do you recommend that the managers of this jewelry shop do?
2. How was the breakeven point in number of sales tickets (number of customer orders written) and breakeven sales in dollars changed from 2003, to 2004, and to 2006?
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