The LadyStyle sells women’s shoes across the country through its chain of shoe stores. It sells 20 different styles of shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager and a store supervisor who are paid a fixed salary. Shoes are sold by the sales team who receive a fixed salary and a sales commission. LadyStyle 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 15,000 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 $19,190, 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 supervisor and store manager are  paid a commission of $0.50 per unit sold and $1.00 per unit sold, respectively, 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 supervisor and store manager are  paid a commission of $0.50 per unit and $1.00 per unit sold, respectively, in excess of the breakeven  point, what would be the store’s operating income if 25,000 units were sold?

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Home Insert Page Layout A Formulas B Unit Variable Data (per pair of shoes) $40.00 $29.00 2.00 $31.00 1 2 Selling price 3 Cost of shoes 4 Sales commission 5 6 Variable cost per unit Data C Review View D Annual Fixed Costs Rent Salaries Advertising Depreciation Other fixed costs Total fixed costs E $ 25,000 96,000 35,000 6,000 9,000 $171,000