5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 55 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating income (loss) if 17,050 pairs of shoes are sold? (Do not round intermediate calculations.)
5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 55 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating income (loss) if 17,050 pairs of shoes are sold? (Do not round intermediate calculations.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Require
mation
[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
Selling price
$
40.00
Variable expenses:
Invoice cost
$
14.00
Sales commission
6.00
Total variable expenses
$
20.00
Annual
Fixed expenses:
Advertising
$ 49,000
41,000
Rent
Salaries
195,000
$ 285,000
Total fixed expenses
5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 55 cents
commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating
income (loss) if 17,050 pairs of shoes are sold? (Do not round intermediate calculations.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Feb79e236-fd35-4e7c-aec1-1f12bebb87a9%2Fd4dd1397-7639-4538-9332-15c120543bc5%2Fnfsjieo_processed.png&w=3840&q=75)
Transcribed Image Text:Require
mation
[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
Selling price
$
40.00
Variable expenses:
Invoice cost
$
14.00
Sales commission
6.00
Total variable expenses
$
20.00
Annual
Fixed expenses:
Advertising
$ 49,000
41,000
Rent
Salaries
195,000
$ 285,000
Total fixed expenses
5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 55 cents
commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating
income (loss) if 17,050 pairs of shoes are sold? (Do not round intermediate calculations.)
Expert Solution
Step 1 Marginal costing and Break Even point
Under Marginal costing system
Operation profit is calculated by reducing variable and fixed cost from sales revenue.
It is pertinent to note that variable cost changes with the change in the level of activity and fixed cost remains constant irrespective of the level of activity.
Break-even point is the point where an entity does not have any profit and loss . This is its revenue is sufficient to cover up all the costs( Fixed and Variable )
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