Reference no: EM133100247

Question - The Walk Rite Shoes Company operates a chain of shoe stores. The stores sell 10 different styles if inexpensive men's shoes with identical unit cost and selling prices. A unit is defined as a pair of shoes. Each store has a manager who is paid fixed salary. Individual salespersons receive a fixed salary and a sales commission. Walk Rite is trying to determine the desirability of operating another store which is expected to have the following revenues and cost relationships.

Selling Price $30.00

Unit variable cost per pair:

Cost of shoes $19.50

Sales commissions 1.50

Total Variable costs $21.00

Annual Fixed Costs:

Rent $60,000

Salaries 200,000

Advertising 80,000

Other fixed costs 20,000

Total fixed costs $360,000

Required -

1. What is the annual breakeven point in (a) Unit Sold and (b) revenues?

2. If 35,000 units are sold, what will be the store's operating income?

3. Refer to the original data. If the store manager were paid $0.30 per unit sold in addition to his current fixed salary, what would be the annual breakeven point in (a) units and (b) revenue?