Question

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)?

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 $ 19.50 sales commission = $ 4.50 $24 Anneal Fixed Expenses : Advertising $ 38,000 Rent = $28,000 salaries = $ 140,000 $206,000 Net operating if 12115 Income pair of shoes are sold ? Income statement of shop 48 of The Fashion shoe company Particulars Pairs units Lin no. by per unit rate Lin & Amount Lin & I 12175 40 487,000 12175 selling price (es): variable Expenses Invoice cost sales commission Total variable Expenses 19-50 4.50 (237,412.50) (54,784-50) 12175 12175 (24) (292200) Contribution 12175 16 194.800 1 (Les): Fired Expenses Advertising - $38.000 Rent = $28.000 salaries = $149000 206,000 Net operating loss (11,200)