Question
Zapatero, Inc. operates a chain of shoe stores around the country.The stores carry many styles of shoes that are all sold at the same price.To
Zapatero, Inc. operates a chain of shoe stores around the country.The stores carry many styles of shoes 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 pair of shoes sold.Sales personnel also receive a small basic salary.
The following cost and revenue data relate to Store 9 and are typical of the companys many sales outlets:
Selling price
P800
Variable expenses:
Invoice costs
P360
Sales commission
140
P500
Fixed expenses per year:
Rent
P1,600,000
Advertising
3,000,000
Salaries
1,400,000
Total
P6,000,000
The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries by P2,142,000 annually.
If this change is made, what will be the number of pairs of shoes to be sold by Store 9 to be indifferent to commission basis?
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