Question

The HighStep Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men's shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. HighStep is considering opening another store that is expected to have the revenue and cost relationships shown here. (Click the icon to view the revenue and cost information.) Read the requirements Requirement 1a. What is the annual breakeven point in units sold? Determine the formula used to calculate the breakeven number of units, then calculate the number of units that must be sold to break even Breakeven number of units i Jal breakeven point in revenues? Contribution margin per unit Fixed costs Selling price Target operating income Variable cost per unit culate the breakeven revenue, then calculate HighStop's annual breakeven point in revenues. = Breakeven revenues X Requirement 2. If 8,000 units are sold, what will be the store's operating income (loss)? Determine the formula used to calculate the operating income (loss) and then enter the amounts to determine the store's operating income (loss). (Use parentheses or a minus sign for a loss.) Operating = income (loss) Requirement 3a. If sales commissions are discontinued and fixed salaries are raised by a total of S15,500, what would be the annual breakeven point in units sold? Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

Computation of Contribution Per unit Particulars Amount Selling Price 60 Less: Varible Cost per unit 40 Contribution Per Unit 20 1A Break Even No.of Units Fixed Costs 1,80,000 . Contribution Margin Per Unit 20 Break Even No.of Units 9,000 을 Ý 1B Breakeven Revenue Breakeven No.of Units 9,000 X Selling Price 1111 Breakeven Revenues 5,40,000 х 60 2 If 8,000 units are sold, then the operating income/loss would be Quantity of Units Sold Contibution Margin Per Unit 8,000 20 х Fixed Costs Operating Income/Loss -20,000 X 1,80,000

3A Computation of Revised Contribution Per unit Particulars Amount Selling Price 60 Less: Varible Cost per unit 37 Contribution Per Unit 23 Computation of Revised Fixed Costs Particulars Amount Present Fixed Costs 1,80,000 Raised by 15,500 Revised Fixed Costs 1,95,500 Break Even No.of Units Fixed Costs 1,95,500 Contribution Margin Per Unit 23 Break Even No.of Units 8,500 . 3B Breakeven Revenue Breakeven No.of Units 8,500 Selling Price Breakeven Revenues 5,10,000 60

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