Question

Problem 5-26 CVP Applications; Break-Even Analysis; Graphing [LO5-1, LO5-2, LO5-4, LO5-5] [The following information applies to the questions displayed below.] 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 $ 25.00 Variable expenses: Invoice cost $ 11.50 Sales commission 3.50 Total variable expenses $ 15.00 Annual Fixed expenses: Advertising $ 32,000 Rent 17,000 Salaries 110,000 Total fixed expenses $ 159,000 Problem 5-26 Part 3 3. If 15,200 pairs of shoes are sold in a year, what would be Shop 48’s net operating income (loss)?

Answer 1

3
Sales revenue	380000	=15200*25
Less: Variable expenses	228000	=15200*15
Contribution margin	152000
Less: Fixed expenses	159000
Net Operating loss	7000	or (7000)