Question

Required Information 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 Sales commission Total variable expenses Fixed expenses: Advertising Rent Salaries Total fixed expenses come oss 3.17 18.900 pairs of shoes are sold in a year what wo Net operating loss

Answer 1

Answer:

Ans.3	Fashion Shoe Company
	SHOP 48
	CVP Income Statement
	Particulars	Amount($)	Amount($)
	Sales (18,900 * $20)		3,78,000
	Variable expenses:
	Invoice cost (18,900 * $6)	1,13,400
	Sales commission (18,900 * $4)	75,600
	Total variable expenses		1,89,000
	Contribution margin		1,89,000
	Fixed expenses:
	Advertising	33,000
	Rent	27,000
	Salaries	1,35,000
	Total fixed expenses		1,95,000
	Net operating loss		-6,000
	*Fixed expenses are always remain constant.
	*Sales = Selling price * Units sold
	*Variable expenses = Variable cost per unit * Units sold

4A)	Particulars
	Sales price	20
Less	Variable cost(10+.70)	10.7
	Contribution margin	9.3
	Contribution margin ratio	46.50%	(9.30/20)
	Fixed cost	1,95,000
	Breakeven in units	20,967.74	per pair
	Breakeven point = Fixed cost / contribution margin	(195000/9.30)
4B)	Breakeven sales in dollars = Fixed cost / contribution margin ratio
	Fixed cost	1,95,000
	Contribution margin ratio	46.50%
	Breakeven sales in dollars	4,19,354.84