Question

Slippers Inc. produces and sells shoes in chain stores. Company sells 10 kinds of cheap shoes with similar costs and selling prices. Each store has a manager working for a salary. Each salesperson is paid salary plus a sales Premium. Company pays extra 1 TL premium to sales person and 1 TL to manager for each pair of shoes sold beyond BEP. Company is to decide whether to open up or not a new store. Budgeted revenue and costs are given below. Per pair (TL) 50,00 25,00 5,00 30,00 Unit variable data Price Unit manufacturing cost Sales commissions Unit variable costs Annual fixed costs Rent Salaries Advertisement Other fixed costs Total fixed costs 100.000 300.000 180.000 20.000 600.000 Required: (evaluate each item seperately) 15 POINTS a) Compute operating profit (loss) assuming 35,000 pairs of shoes are sold. b) Compute target sales in units and TL to earn TL 180,000 operating profit. c) Assume Company pays extra 1 TL premium to sales person for each pair sold over 40.000 pairs. Compute operating profit if 50,000 pairs of shoes are sold.

Answer 1

Question

Answer

			(a )Current		( C )
	units ( Pairs)	Per unit	35000		50000
		TL
	Sale @		50		50
	Sales TL	50.00	1750000	50.00	2500000
	Less: Variable cost
	Manufacturing cost	25.00	875000	25.00	1250000
	sales commission	5.00	175000	5.00	250000
	sales commission 1 TL				10000
	Over 40000 Pairs
	Total Varibable Exp	30.00	1050000	$30.00	1510000
	Contribution margin	20.00	700000	20.00	990000
	Less: Fixed Expenses
	Rent		100000		100000
	Salaries		300000		300000
	Advertisement		180000		180000
	Other Fixed Cost		20000		20000
	Total Fixed Expenses		600000		600000
	Operating Income		100000		390000
	Operating Income		TL 100000		TL 390000
b	BEP in units	Fixed cost + Targent Profit/ Sales - variable cost
		TL 600000+180000/ TL 50 -30
		780000/20
		39000	Units