# The Stuff

Topics: Costs, Variable cost, Sales Pages: 2 (414 words) Published: October 1, 2012
CVP analysis, shoe store. The WalkRite Shoe Company operates a chain of shoe stores that sells 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. WalkRite is considering opening another store that is expected to have the revenue and cost relationships shown here:

Per Unit__________
Selling Price.............................\$30.00

Cost of Shoes...........................\$19.50
Sales commissions.................. \$ 1.50
Total Variable per pair............ \$21.00

Total Fixed Costs..................\$360,000

Consider each question independently:
1. What is the annual breakeven point in (a) units sold and (b) revenues? 2. If 35,000 units are sold, what will be the store's operating income (loss)? 3. How many units must the company sell to generate an operating income of \$100,000. 4. How many units must the company sell to generate an after tax operating income of \$100,000 assuming a tax rate is 40%

5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of \$.30 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues? 6. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of \$.30 per unit in excess of the breakeven point, what would be the store's operating income if 50,000 units were sold. 7. WalkRite is considering a new "Fixed-Salaries-Only Plan".

a. If sales commissions are discontinued and fixed salaries are raised by a total of \$81,000, what would be the annual breakeven point in (a) units and (b) revenues?

b. Calculate the number of units sold at which the owner of WalkRite would be indifferent between the original...