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 $ 16.00 Sales commission 4.00 Total variable expenses $ 20.00 Annual Fixed expenses: Advertising $ 45,000 Rent 31,000 Salaries 155,000 Total fixed expenses $ 231,000 What is Shop 48's annual break-even point in unit sales and dollar sales?

Save & Exit Required information 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 Variable expenses: Invoice cost $ 40.00 $ 16.00 Sales commission 4.00 Total variable expenses 20.00 Annual Fixed expenses $ 45,000 31,000 155,000 Advertising Rent Salaries 231,000 Total fixed expenses

Answer 1

Break even point in units = Fixed cost/Contribution margin per unit

= 231,000/(40-20)

= 11,550 units

Breakeven point in dollars

= 11,550 * 40

= 462,000