Cvp Analysis

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...