The Smith Shoe Company operates a chain of shoe stores that sell 10 different styles of expensive childrens shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. Smith is considering opening another store that is expected to have the revenue and cost relationships shown here.

Unit Variable Data (per pair of shoes)			Annual Fixed Costs
Selling price	$50.00		Rent	$50,000
Cost of shoes	$27.50		Salaries	210,000
Sales commission	2.50		Advertising	85,000
Variable cost per unit	$30.00		Other fixed costs	15,000
			Total fixed costs	$360,000

Required (consider each question independently):

1. What is the annual breakeven point in (a) units sold and (b) revenues?

2. If, in addition to his fixed salary, the store manager is paid a commission of $0.50 per unit sold in excess of the breakeven point, what would be the stores operating income if 60,000 units were sold?

3. Assume you are Brett, the owner of the Smith Shoe Co. You open the new store on January 1, 202X with the original salary-plus-commission compensation plan in place. Because you expect the cost of the shoes to rise due to inflation, you place a firm bulk order for 75,000 shoes and lock in the $27.50 price per unit. But toward the end of the year, only 59,000 shoes are sold, and you authorize a markdown of the remaining inventory to $40.00 per unit. Finally, all units are sold. Salespeople, as usual, get paid a commission of 5% of revenues. What is the annual operating income for the store?