Required information

Problem 6-26 (Algo) CVP Applications; Break-Even Analysis; Graphing [LO6-1, LO6-2, LO6-4, LO6-5]

[The following information applies to the questions displayed below.]

The Fashion Shoe Company operates a chain of womens shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary.

The following data pertains to Shop 48 and is typical of the companys many outlets:

Per Pair of ShoesSelling price$ 25.00Variable expenses: Invoice cost$ 10.50Sales commission4.50Total variable expenses$ 15.00 AnnualFixed expenses: Advertising$ 40,000Rent37,000Salaries180,000Total fixed expenses$ 257,000

Problem 6-26 (Algo) Part 5

5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 45 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating income (loss) if 28,200 pairs of shoes are sold? (Do not round intermediate calculations.)

SellingpriceVariableexpenses:InvoicecostSalescommissionTotalvariableexpensesFixedexpenses:AdvertisingRentSalariesTotalfixedexpensesPerPairofShoes$25.00$10.504.50$15.00Annual$40,00037,000180,000$257,000