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Date Submitted: 02/26/2011 09:40 AM
CVP Analysis
Excel Assignment
(Page 91, question 3-38)
Tayra Lopez
9/15/2010
ACG3341
Professor Pritchard
CVP analysis, shoe stores.
The WalkRite Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men’s shoes with identical units 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 sales people 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:
1. What is the annual break-even point in (a) units sold and (b) revenues?
Contribution margin per unit is $30-21=$9
a. Units sold=Fixed costs/Contribution Margin per unit
$360,000/$9= 40,000
b. Revenues =Units sold x Selling price
40,000 x $30= $1,200,000
2. If 35,000 units are sold, what will be the store’s operating income (loss)?
The store has an operating income loss of $45,000.
3. If sales commissions are discontinued and fixed salaries are raised by a total of $81,000, what would be the annual breakeven point in (a) units sold and (b) revenues?
Contribution margin per unit is $30-19.50= $10.50
Total fixed costs $360,000 + salaries raised by $81,000= $441,000
a. Units sold= $441,000/10.50= 42,000
b. Revenues= 42,000 x $30= $1,260,000
4. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.30 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues?
Contribution margin per unit= $30-21-0.30= $8.70
a. Units sold= $360,000/$8.70= 41, 380
b. Revenues= 41,380 x $30= $1,241,400
5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.30 per unit excess of the breakeven point, what...