The Dress4Less Company operates a chain of men’s clothing stores that sells 10 different styles of inexpensive men’s suits with identical unit costs and selling prices. A unit is defined as one suit. Each store has a manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. Dress4Less is considering opening another store that is expected to have the revenue and cost relationships shown here:

Consider each question independently:

Required

1. What is the annual breakeven point in

(a) Units sold and

(b) Revenues?

2. If 8,000 units are sold, what will be the store’s operating income (loss)?

3. If sales commissions are discontinued and fixed salaries are raised by a total of $ 90,000, what would be the annual breakeven point in

(a) Units sold and

(b) Revenues?

4. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $ 0.75 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues?

5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $ 0.75 per unit in excess of the breakeven point, what would be the store’s operating income if 15,000 units were sold?

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Unit Variable Data (per suit) Annual Fixed Costs Selling price $160.00 Rent $ 45,000 Cost of suits $120.00 Salaries 200,000 Sales commission 8.00 Advertising 50,000 Variable cost per unit $128.00 Other fixed costs 25,000 Total fixed costs $320,000