Question
Threads Unlimited operates a chain of shirt stores that carry many styles of shirts that are all sold at the same price. To encourage sales
Threads Unlimited operates a chain of shirt stores that carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary. The following worksheet contains cost and revenue data for Store 45. These data are typical of the company's many outlets: Per Shirt Selling price $ 58.00 Variable expenses: Invoice cost $ 27.00 Sales commission 10.60 Total variable expenses $ 37.60 Annual Fixed expenses: Rent $ 200,940 Advertising 105,470 Salaries 95,470 Total fixed expenses $ 401,880 The company has asked you, as a member of its planning group, to assist in some basic analysis of its stores and company policies. Required: 1. Calculate the annual break-even point in dollar sales and in unit sales for Store 45. (Do not round intermediate calculations.) 3. If 18,200 shirts are sold in a year, what would be Store 45's net operating income or loss? (Do not round intermediate calculations.) 4. The company is considering paying the store manager of Store 45 an incentive commission of $0.70 per shirt (in addition to the salespersons' commissions). If this change is made, what will be the new break-even point in dollar sales and in unit sales? (Do not round intermediate calculations.) 5. Refer to the original data. As an alternative to (4) above, the company is considering paying the store manager a $0.70 commission on each shirt sold in excess of the break-even point. If this change is made, what will be the store's net operating income or loss if 23,140 shirts are sold in a year? (Do not round intermediate calculations.) 6 Refer to the original data. The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries by $162,320 annually. If this change is made, what will be the new break-even point in dollar sales and in unit sales in Store 45? (Do not round intermediate calculations.)
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