Reference no: EM132564601

Zapatero, Inc. operates a chain of shoe stores around the country. The stores carry many styles of shoes that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each pair of shoes sold. Sales personnel also receive a small basic salary.

The following cost and revenue data relate to Store 9 and are typical of the companys many sales outlets:

Selling price                     P800

Variable expenses:

Invoice costs                     P360

Sales commission                   140

                                        P500

Fixed expenses per year:

Rent            P1,600,000

Advertising   3,000,000

Salaries         1,400,000

Total           P6,000,000

The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries by P2,142,000 annually.

Question 1: If this change is made, what will be the number of pairs of shoes to be sold by Store 9 to be indifferent to commission basis?