The WalkRite Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men's 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. WalkRite 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	$30,000
Cost of shoes	$25.00		Salaries	180,000
Sales commission	1.00		Advertising	38,000
Variable cost per unit	$26.00		Other fixed costs	16,000
			Total fixed costs	$264,000

Consider each question independently.

1.	What is the annual breakeven point in (a) units sold and (b) revenues?
2.	If 38,000 units are sold, what will be the store's operating income (loss)?
3.	If sales commissions are discontinued and fixed salaries are raised by a total of $6,000, what would be the annual breakeven point in (a) units sold and (b) revenues?
4.	Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $2.00 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues?
5.	Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $2.00 per unit in excess of the breakeven point, what would be the store's operating income if 50,000 units were sold?

Requirement 1a. What is the annual breakeven point in units sold?

Determine the formula used to calculate the breakeven number of units, then calculate the number of units that must be sold to break even.

Fixed costs

/

Contribution margin per unit

=

Breakeven number of units

Requirement 1b. What is the annual breakeven point in revenues?

Determine the formula used to calculate the breakeven revenue, then calculate

WalkRite's annual breakeven point in revenues.

Breakeven number of units

x

Selling price

=

Breakeven revenues

Requirement 2. If 38,000 units are sold, what will be the store's operating income (loss)?

Determine the formula used to calculate the operating income (loss) and then enter the amounts to determine the store's operating income (loss). (Use parentheses or a minus sign for a loss.)

							Operating
(	Contribution margin per unit	x	Quantity of units sold	) -	Fixed costs	=	income (loss)

Requirement 3a. If sales commissions are discontinued and fixed salaries are raised by a total of $6,000,

what would be the annual breakeven point in units sold?

The annual breakeven point in units sold would be

units.

Requirement 3b. If sales commissions are discontinued and fixed salaries are raised by a total of $6,000,

what would be the annual breakeven point in revenues?

The annual breakeven point in revenues would be $

.

Requirement 4a. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $2.00

per unit sold, what would be the annual breakeven point in units sold? (Do not round any of your calculations.)

The annual breakeven point in units sold would be

units.

Requirement 4b. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $2.00

per unit sold, what would be the annual breakeven point in revenues? (Do not round any of your calculations.)

Using the same information as requirement 4a, calculate the breakeven point in revenues.

The annual breakeven point in revenues would be $

.

Requirement 5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $2.00

per unit in excess of the breakeven point, what would be the store's operating income if 50,000

units were sold? (Do not round any of your calculations.)

Operating income would be $