Question

10 Beta company sells blouses in Washington, USA. Blouses are imported from Pakistan and are sold to customers in Washington of a profit. Salespersons are poid basic salary plus a decent commission of $14 on each sale made by them. Selling price and expense data is given below. Selling Price per Blouse ($) 80.00 Variable expenses per Blouse: Invoice Cost Sales Commission 36.00 14.00 50.00 Annual Fixed Expenses: Rent Marketing Salaries Total Fixed Expenses 160,000 300,000 140,000 600,000 Required: a) Compute the break-even point in units and in dollars using the information given above. (3 mks) b) Prepare a break-even graph and show the break-even point, the profit wedge and the loss wedge on the graph. (5 mks) c) What would be net operating income or loss if company sells 18,500 blouses in a year? (3 mks) d) If the manager is paid a commission of Só per blouse in addition to the salesperson's commission what will be the effect on company's break-even pointe (3 mks) e) As an alternative to (iv) above, company is thinking to pay $6 commission to manager on each blouse sold in excess of break even point. What will be the effect of these changes on the net operating income or loss of the Beta Company if 23,500 blouses are sold in a year (3 mks) Referring to the original data. What will be the break-even point of the company if commission is entirely eliminated and salaries are increased by $214,000? (3 mks) (Total = 20 marks)

Answer 1

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