The Fashion Shoe Company operates a chain of women’s shoe shops that carry many

Question

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 substantial commission on each pair of shoes sold (in addition to a small base salary) in order to encourage them to be aggressive in their sales efforts.

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 substantial commission on each pair of shoes sold (in addition to a small base salary) in order to encourage them to be aggressive in their sales efforts.

Explanation / Answer

The Fashion Shoe company Analysis Given SP= $20 Total variable Exp = $10. Contribution= Selling Price-Variable cost Contribution per Unit= 20-10 = 10 Total Fixed expenses= 223000 Break even point = Fixed cost/ Contribution per Unit Break even point = 223000/10 = 22300 Units Given in Question 5 No of shoes sold = 25800 Shoes in excess of Break even = 25800-22300=3500 units Particulars Amount Sales 516000 Less: Invoice cost -116100 Sales Commision -143475 Advertisement -43000 Rent -30000 Salaries -150000 Net operating Income 33425 Question 6: Given SP= $20 Total variable Exp = $4.5. Contribution= Selling Price-Variable cost Contribution per Unit= 20-4.5 = 15.5 Total Fixed expenses= 223000 + 31200 = 254200 New Break even point = Fixed cost/ Contribution per Unit New Break even point = 254200/15.5 = 16400 Units New Break even Sales = 16400*20= $328000

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