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Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really hurnining, and sales growth at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price Per unit variable expenses Purchase cost Sales commissions Total per unit variable costs Total annual fixed expenses Advertising Rent Salaries Total fixed expenses Required: $ 80.00 37.50 27.50 $ 55.00 $157,500 178,000 286,750 $ 622,250 1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars 2. If Bubba's sells 26,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income statement 3. If Bubba's sells 38.000 hats, what is its margin of safety (MOS) in dollars and MOS ratio? 4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $206,500 annually. What would be i the new breakeven point in units? What would be the before-tax income or loss if 26.000 hats are sold with the new salary plan? Complete this question by entering your answers in the tabs below. Required 1 Requared2 Required 3 Required 4 Calculate the annual breakeven point, both in terms of units and in terms of salon dollars. (Do not round intermediate calculations,) In units In sales dollars Breakeven Points Required 2

Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really hurnining, and sales growth at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price Per unit variable expenses Purchase cost Sales commissions Total per unit variable costs Total annual fixed expenses Advertising Rent Salaries Total fixed expenses Required: $ 80.00 37.50 27.50 $ 55.00 $157,500 178,000 286,750 $ 622,250 1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars 2. If Bubba's sells 26,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income statement 3. If Bubba's sells 38.000 hats, what is its margin of safety (MOS) in dollars and MOS ratio? 4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $206,500 annually. What would be i the new breakeven point in units? What would be the before-tax income or loss if 26.000 hats are sold with the new salary plan? Complete this question by entering your answers in the tabs below. Required 1 Requared2 Required 3 Required 4 Calculate the annual breakeven point, both in terms of units and in terms of salon dollars. (Do not round intermediate calculations,) In units In sales dollars Breakeven Points Required 2

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter10: Forecasting Financial Statement
Section: Chapter Questions
Problem 9PC: The Home Depot is a leading specialty retailer of hardware and home improvement products and is the...
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Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really hurnining, and sales growth at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price Per unit variable expenses Purchase cost Sales commissions Total per unit variable costs Total annual fixed expenses Advertising Rent Salaries Total fixed expenses Required: $ 80.00 37.50 27.50 $ 55.00 $157,500 178,000 286,750 $ 622,250 1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars 2. If Bubba's sells 26,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income statement 3. If Bubba's sells 38.000 hats, what is its margin of safety (MOS) in dollars and MOS ratio? 4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $206,500 annually. What would be i the new breakeven point in units? What would be the before-tax income or loss if 26.000 hats are sold with the new salary plan? Complete this question by entering your answers in the tabs below. Required 1 Requared2 Required 3 Required 4 Calculate the annual breakeven point, both in terms of units and in terms of salon dollars. (Do not round intermediate calculations,) In units In sales dollars Breakeven Points Required 2
Transcribed Image Text:Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really hurnining, and sales growth at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price Per unit variable expenses Purchase cost Sales commissions Total per unit variable costs Total annual fixed expenses Advertising Rent Salaries Total fixed expenses Required: $ 80.00 37.50 27.50 $ 55.00 $157,500 178,000 286,750 $ 622,250 1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars 2. If Bubba's sells 26,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution income statement 3. If Bubba's sells 38.000 hats, what is its margin of safety (MOS) in dollars and MOS ratio? 4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $206,500 annually. What would be i the new breakeven point in units? What would be the before-tax income or loss if 26.000 hats are sold with the new salary plan? Complete this question by entering your answers in the tabs below. Required 1 Requared2 Required 3 Required 4 Calculate the annual breakeven point, both in terms of units and in terms of salon dollars. (Do not round intermediate calculations,) In units In sales dollars Breakeven Points Required 2
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