The One Price Shoe Company is a retailer of shoes. Though it sells a variety of styles of both mens and womens shoes, all styles have identical costs per paid and identical selling price. Sales persons receive a fixed salary plus a commission on each pair of shoes sold. The company is considering opening a second outlet and has estimated the following revenues and costs for the new store:

Unit (per pair) variable data:

Selling price $45.00

Cost of Shoes 29.00

Sales commissions 2.25

Annual fixed costs:

Rent $90,000

Salaries 300,000

Advertising 120,000

Other fixed costs 30,000

Required:

1. Based on the above estimates, what will be the proposed new stores breakeven point in pairs sold? In revenue? (2 marks)
2. If 35,000 pairs are sold what will be the shoes operating income (loss)? (2 marks)
3. If the commissions to sales persons are discontinued ad replaced with an additional $105,570 in salaries to salespersons, what will be the annual breakeven point in pairs sold? In revenue?

(2 marks)

4. Refer to the original data. If the store manage was paid $0.45 per pair sold in additional to her/his fixed salary, what would be the breakeven point in pair sold? In revenue? (3 marks)
5. Refer to the original data. If the store manager was paid $0.45 per pair sold in excess of the breakeven point, what would be the stores operating income if 50,000 pairs are sold? (the commission is in addition to the managers salary) (3 marks)

Show all of your calculations in a presentable report for managements purposes.

Include your recommendation in your report. (3 marks)

use contribution margin per unit calculating numbers of pairs and contribution margin ratio to calculate $ sales amounts. Where necessary round pair calculations to the next higher full pair and $ sales amounts to the next higher $100.