SuperShades operates a kiosk at the local mall, selling sunglasses for $ 20 each. SuperShades currently pays $ 800 a month to rent the space and pays two full-time employees to each work 160 hours a month at $ 10 per hour. The store shares a manager with a neighboring mall and pays 50% of the manager’s annual salary of $ 40,000 and benefits equal to 20% of salary. The wholesale cost of the sunglasses to the company is $ 5 a pair.
1. How many sunglasses does SuperShades need to sell each month to break even?
2. If SuperShades wants to earn an operating income of $ 4,500 per month, how many sunglasses does the store need to sell?
3. If the store’s hourly employees agreed to a 15% sales-commission-only pay structure, instead of their hourly pay, how many sunglasses would SuperShades need to sell to earn an operating income of $ 4,500?
4. Assume SuperShades pays its employees hourly under the original pay structure, but is able to pay the mall 8% of its monthly revenue instead of monthly rent. At what sales levels would SuperShades prefer to pay a fixed amount of monthly rent, and at what sales levels would it prefer to pay 8% of its monthly revenue as rent?