A-3 Problem 9-37 (Algo) CVP Analysis; Strategy [LO 9-1, 9-2, 9-3]Bubba's Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba's carries numerous styles of western hats, each hathas approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commissionto encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growthat Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable andcourteous staff to attract and retain customers who otherwise might go to other western wear stores. Because of the rapid growth insales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiringand training new salespeople.Sales pricePer unit variable expensesPurchase costSales commissionsTotal per unit variable costsTotal annual fixed expensesAdvertisingRentSalariesTotal fixed expensesRequired:1. Calculate the annual breakeven point, both in terms of units and in terms of sales dollars.2. If Bubba's sells 33,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution incomestatement.3. If Bubba's sells 46,000 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 $286,500 annually. What would bethe new breakeven point in units? What would be the before-tax income or loss if 33,000 hats are sold with the new salary plan?Required 1 Required 2Complete this question by entering your answers in the tabs below.Required 3Before-tax income or loss$ 80.0029.5025.50$ 55.00Contribution Income Statement$ 237,500218,000343,750$ 799,250If Bubba's sells 33,000 hats, what is its before-tax income or loss? Support your answer by preparing a contribution incomestatement.$Required 40

Breakeven point is a point where there is no profit or loss. It is the point where fixed cost equals…

he business is very competitive, however, and Bubba, the owner, has re retain customers who otherwise might go to other western wear stores he management of certain aspects of the business more difficult, such a e. es costs $ 80.00 29.50 25.50 $ 55.00

he business is very competitive, however, and Bubba, the owner, has re retain customers who otherwise might go to other western wear stores he management of certain aspects of the business more difficult, such a e. es costs $ 80.00 29.50 25.50 $ 55.00

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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