1. Threads Unlimited operates a chain of shirt stores that carry many styles of

Question

1. Threads 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 45. These data are typical of the company's many outlets: Per Shirt $ 58.00 Selling price Variable expenses: Invoice cost Sales commission $ 27.00 10.60 Total variable expenses $ 37.60 Annual Fixed expenses: Rent Advertising Salaries 200,940 05,470 95,470 Total fixed expenses 401,880 The company has asked you, as a member of its planning group, to assist in some basic analysis of its stores and company policies

Explanation / Answer

Selling price 58 Variable cost 27 Contribution margin 31 Contribution margin ratio 53.45% (31/58) Fixed cost 564200 (401880+162320) 1 Breakeven in units = Fixed cost / contribution margin per unit Fixed cost 564200 Contribution margin 31 Breakeven in units 18200 Shirts 2 Breakeven in dollars = Fixed cost / contribution margin ratio Fixed cost 564200 Contribution margin ratio 53.45% Breakeven in dollars 1055600

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