Msm company sells clothing for young adults

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Reference no: EM13951949

MSM company sells clothing for young adults. The firm has normal monthly fixed costs of $90,000 ($38,000 of this amount is fixed salaries). The firm's variable cost ratio averages 60%. The firm operates 3 stores in the mid atlantic region. The firm is considering reducing monthly fixed salaries (currently $38,000) and using a combination salary and commission employee compensation plan. The reduction in fixed salaries would equal $10,000 monthly and be replaced with a 3% of gross sales commission payment. The 3% wold be shared by all fixed salary employees.

a) calculate the new breakeven point in monthly sales dollars.

b) calculate the new level of monthly sales dollars needed to earn an operating profit of $10,000 monthly.

Reference no: EM13951949

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