Question
Maya opened an online shoe business that sells a single type of leather dress shoes. The shoe sells (sales price) for $850 each. The variable
Maya opened an online shoe business that sells a single type of leather dress shoes. The shoe sells (sales price) for $850 each. The variable cost per shoe sold is $550. The total annual fixed costs for the online business are $650,000. Maya, who does not have a background in accounting wants to know things like how many pairs of shoes she will have to sell before she will start making profits and how many she will have to sell to make a certain amount of profit. Since she does not have an accounting background, she has asked for your help in understanding the relationship between costs, number of pairs of shoes she sells and the profit the business makes.
1. How many pairs of shoes will Maya need to sell to achieve break even?
2. What is the amount of sales dollars at break-even point?
3. Maya wants to earn a profit of $250,000. How many pairs of shoes must Maya sell to achieve a profit of $250,000?
4. Maya is currently selling 3,500 pairs of shoes each year. Is Maya's online shoe business making a profit or a loss? Explain your answer. Note: You do not need to do any calculations
Step by Step Solution
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Step: 1
1 To achieve break even Maya needs to sell enough shoes to cover her total costs both variable and f...Get Instant Access to Expert-Tailored Solutions
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Step: 2
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