Basic Cvp

The Fashion Shoe Company operates a chain of women's shoe shops around the country. The shops carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a substantial commission on each pair of shoes sold (in addition to a small basic salary) in order to encourage them to be aggressive in their sales efforts. The following worksheet contains cost and revenue data for Shop 48 and is typical of the company's many outlets: Per Shoe Selling Price 30 Variable expense Invoice cost 13.5 Sales commission 4.5 Total Variable Cost 18 Annual Fixed Expense Advertising 30000 Rent 20000 Salaries 100000 Total fixed cost 150000

Calculate the annual break-even point in dollar sales and in unit sales for Shop 48.

150000/12 = 12500 units and in dollars = 12500 x 30 = $375000

Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph.

| | | | | | | |

|

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

| | | | | | | |

If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income or loss?

12000 x 12 = 144000-150000 = 6000 net loss.

The company is considering paying the store manager of Shop 48 an incentive commission of Shop 48 an incentive commission of 75 cents per pair of shoes (in addition to the salesperson's commission). If this change is made, what will be the new break-even point in dollar sales and in unit sales? Refer to the original data.

150000/11.25 = 13333 units and in $ = $400000

As...