ubba’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 enco
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 humming, 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 | $ 80.00 |
|---|---|
| Per unit variable expenses | |
| Purchase cost | 26.50 |
| Sales commissions | 28.50 |
| Total per unit variable costs | $ 55.00 |
| Total annual fixed expenses | |
| Advertising | $ 267,500 |
| Rent | 233,000 |
| Salaries | 369,250 |
| Total fixed expenses | $ 869,750 |
Calculate the annual breakeven point, both in terms of units and in terms of sales dollars.
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