90.2K

Verified Solution

Link Copied!

Shirts Unlimited operates a chain of shirt stores that carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary.

The following worksheet contains cost and revenue data for Store 36. These data are typical of the company's many outlets:

	Per Shirt
Selling price	$	40.00
Variable expenses:
Invoice cost	$	18.00
Sales commission		7.00
Total variable expenses	$	25.00
		Annual
Fixed expenses:
Rent	$	153,750
Advertising		81,875
Salaries		71,875
Total fixed expenses	$	307,500

The company has asked you, as a member of its planning group, to assist in some basic analysis of its stores and company policies.

Required:
1.	Calculate the annual break-even point in dollar sales and in unit sales for Store 36. (Do not round intermediate calculations. Omit the "$" sign in your response.)

Break-even point in unit sales		shirts
Break-even point in dollar sales	$

3.	If 19,900 shirts are sold in a year, what would be Store 36's net operating income or loss? (Input the amount as a positive value. Do not round intermediate calculations. Omit the "$" sign in your response.)

(Click to select)Net operating lossNet operating income

$

4.

The company is considering paying the store manager of Store 36 an incentive commission of $0.80 per shirt (in addition to the salespersons' commissions). If this change is made, what will be the new break-even point in dollar sales and in unit sales? (Do not round intermediate calculations. Round your final answers to 2 decimal places. Omit the "$" sign in your response.)

New break-even point in unit sales		shirts
New break-even point in dollar sales	$

5.

Refer to the original data. The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries by $110,500 annually. If this change is made, what will be the new break-even point in dollar sales and in unit sales in Store 36? (Do not round intermediate calculations. Omit the "$" sign in your response.)

New break-even point in unit sales		shirts
New break-even point in dollar sales	$

Answer & Explanation Solved by verified expert

See Answer