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The Fashion Shoe Company operates a chain of women’s shoe shops that carry many styles of...

The Fashion Shoe Company operates a chain of women’s shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company’s many outlets: Per Pair of Shoes Selling price $ 40.00 Variable expenses: Invoice cost $ 19.50 Sales commission 4.50 Total variable expenses $ 24.00 Annual Fixed expenses: Advertising $ 38,000 Rent 28,000 Salaries 140,000 Total fixed expenses $ 206,000 Problem 5-26 Part 3 3. If 12,175 pairs of shoes are sold in a year, what would be Shop 48’s net operating income (loss)?

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Answer #1

Shop 48's NET OPERATING LOSS on selling 12,175 pairs of shoes in a year is $11200.

Net operating income= Contribution - fixed expenses

Contribution= Selling price - variable expenses

Calculation of the net operating Income (loss) Provided selling price per pair of shoe - $40 Variable Expenses : Invoice cost

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