styles of shoes that are all sold at the same price. Sales personnel in the shop
ID: 2542478 • Letter: S
Question
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 following worksheet contains cost and revenue data for Shop 48 and is typical of the company's many outlets: Per Pair of Shoes $30.00 Selling price Variable expenses: Invoice cost Sales commissiorn $9.50 5.50 Total variable expenses $15.00 Annual Fixed expenses: Advertisingg Rent Salaries $58,000 37000 190,000 Total fixed expenses $285,000Explanation / Answer
1.
Contribution margin per pair of shoes = Selling price per pair of shoes - Variable expenses per pair of shoes
= 30 - 15 = 15
Contribution margin percentage = Contribution margin per pair of shoes / Selling price per pair of shoes
= 15 / 30
= 50%
2.
3.
Incentive comission per pair of shoes = 0.75
Total variable expenses after Incentive commission = 15 + 0.75 = 15.75
Contribution margin per pair of shoes = Selling price per pair of shoes - Variable expenses per pair of shoes
= 30 - 15.75 = 14.25
Contribution margin percentage = Contribution margin per pair of shoes / Selling price per pair of shoes
= 14.25 / 30
= 47.5%
4.
Variable expenses after eleminating sales comissions = 9.5
Fixed expenses after fixed salaries = 285,000 + 30,700 = 315,000
Contribution margin per pair of shoes = Selling price per pair of shoes - Variable expenses per pair of shoes
= 30 - 9.5 = 20.5
Contribution margin percentage = Contribution margin per pair of shoes / Selling price per pair of shoes
= 20.5 / 30
= 68.33%
Break even point in unit sales Fixed costs/contribution margin per pair of shoes 19,000 (285,000/15) Breakeven point in dollar sales Fixed costs/contribution margin percenatge 570,000 (285,000/50%)Related Questions
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