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.
Warren is considering opening another store that is expected to have the revenue and cost relationships shown here.
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Unit Variable Data (per pair of shoes)
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Annual Fixed Costs
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Selling price
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$56.00
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Rent
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$55,000
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Cost of shoes
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$21.00
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Salaries
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250,000
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Sales commission
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7.00
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Advertising
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54,000
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Variable cost per unit
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$28.00
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Other fixed costs
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19,000
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Total fixed costs
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$378,000
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Consider each question? independently:
1. What is the annual breakeven point in (a) units sold and? (b) revenues?
2. If 32,000 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 $10,500,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 $2.80 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 $2.80 per unit in excess of the breakeven point, what would be the store's operating income if 57,000 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.
/ = Breakeven number of units
/ =