Question

Required information Problem 5-26 CVP Applications; Break-Even Analysis; Graphing (LO5-1, LO5-2, LO5-4, LO5-5) [The following information applies to the questions displayed below.] The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Per Pair of Shoes $ 30.00 Selling price Variable expenses: Invoice cost Sales commission Total variable expenses $ $ 8.00 7.00 15.00 Annual Fixed expenses: Advertising Rent Salaries Total fixed expenses $ 35,000 30,000 145,000 $210,000 Problem 5-26 Part 4 4. The company is considering paying the Shop 48 store manager 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 unit sales and dollar sales? (Do not round intermediate calculations. Round your final answers to the nearest whole number.) pairs New break-even point in unit sales New break-even point in dollar sales

Answer 1

Hi

Let me know in case you face any issue:

Answers are highlighted in yellow: Solution: New Contribution margin per unit (30) - (15+0.75) = 14.25 a) New break-even point in unit sales (210000/14.25) = 14737 pairs b) New break-even point in dollar sales (210000)/(14.25/30)= $ 442,105