BUS 630 Week 2 Assignment Basic CVP Analysis Fashion Shoe Company

BUS 630 Week 2 Assignment Basic CVP Analysis Fashion Shoe Company

BUS 630 Week 2 Assignment Basic CVP Analysis Fashion Shoe Company

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Complete the following exercise
(Problem 4-21) and submit to your instructor.
 
The Fashion Shoe Company operates a chain of women’s shoe shops around the country. The shops carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a substantial commission on each pair of shoes sold (in addition to a small basic salary) in order to encourage them to be aggressive in their sales efforts.
 
The following worksheet contains cost and revenue data for Shop 48 and is typical of the company’s many outlets:
 
 
 
 
Per Pair of
Shoes
 
Selling
price
 
$    
30.00
 
 
 
 
 
Variable
expenses:
 
 
 
Invoice
cost
 
$     13.50
 
Sales
commission
 
         
4.50
 
Total variable
expenses
 
$    
18.00
 
 
 
 
 
 
 
Annual
 
Fixed
expenses:
 
 
 
Advertising
 
$   30,000
 
Rent
 
      20,000
 
Salaries
 
   
100,000
 
Total fixed
expenses
 

150,000
 
 
 
Calculate the annual break-even point in dollar sales and in unit sales for Shop 48.
Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph.
If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income or loss?
The company is considering paying the store manager of Shop 48 an incentive commission of Shop 48 an incentive commission of 75 cents per pair of shoes (in addition to the salesperson's commission). If this change is made, what will be the new break-even point in dollar sales and in unit sales?
Refer to the original data. As an alternative to (4) above, the...

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