Question 2 (18 marks)
	The Top Table Company operates a single store. The stores sell ten different styles of table-top items with identical unit costs and selling prices. A unit is defined as one table. The store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. Top Table is trying to determine the desirability of opening another store, which is expected to have the same revenue and cost relationships as the first store (as shown below).
	Selling price:		$ 40.00
	Unit variable costs:
	Shoes	$ 19.50
	Sales commissions	1.50
	Total variable costs		$ 21.00
	Contribution margin per unit		$ 19.00
	Fixed costs:
	Manager's salary	80,000
	Salespeople salary	200,000
	Other fixed costs	150,000
	Required:
a	(4 marks) Compute the break-even point in sales dollars based upon the information provided.
b	(4 marks) Assume that the selling price goes up 10% and the sales commission rate doubles. Compute the new break-even point in sales dollars.
c	(5 marks) Compute the sales dollars required to attain the target profit of $1,900,000, assuming that the new store does not hire a manager or any salespeople, and instead uses independent sales agents at a 25% sales commission and the unit price is now $44.00.
d	(5 marks) Compute the sales dollars that would be required to generate the same operating income, whether Top Table employs its own salespersons or continues to use the independent sales agents and pays them a 25% commission (for this question, refer back to the data provided above - ignore the changes found in b and c).

Answer rating: 100% (QA)

a To compute the breakeven point in sales dollars we need to determine the level of sales at which the companys total revenue equals its total costs B... View the full answer