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 $ 25.00 Variable expenses: Invoice cost $ 11.50 Sales commission 3.50 Total variable expenses $ 15.00 Annual Fixed expenses: Advertising $ 32,000 Rent 17,000 Salaries 110,000 Total fixed expenses $ 159,000 6. Refer to the original data. The company is considering eliminating sales commissions entirely in its shops and increasing fixed salaries by $35,400 annually. If this change is made, what will be Shop 48's new break-even point in unit sales and dollar sales? (Do not round intermediate calculations.)
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 | $ 25.00 |
| Variable expenses: | |
| Invoice cost | $ 11.50 |
| Sales commission | 3.50 |
| Total variable expenses | $ 15.00 |
| Annual | |
|---|---|
| Fixed expenses: | |
| Advertising | $ 32,000 |
| Rent | 17,000 |
| Salaries | 110,000 |
| Total fixed expenses | $ 159,000 |
6. Refer to the original data. The company is considering eliminating sales commissions entirely in its shops and increasing fixed salaries by $35,400 annually. If this change is made, what will be Shop 48's new break-even point in unit sales and dollar sales? (Do not round intermediate calculations.)
Break even point :— It is the point of production where total cost is equal to total revenue. At this point, the profit is equal to zero. At this point, the fixed cost is equal to contribution margin. Break-even point in units is calculated by dividing fixed cost by contribution margin per unit. Break-even point in sales revenue is calculated by dividing fixed cost by contribution margin ratio.
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