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CVP Analysis

Per Price of Shoes

Selling Price 30.00

Variable Expenses
Invoice Cost 13.50
Sales commission 4.50
Total Variable expenses 18.00
Annual
Fixed Expenses
Advertising 30,000
Rent 20,000
Salaries 100,000
Total Fixed Expenses 150,000

1. Calculate the annual breakeven point in dollar and in unit sales for shop 48?
2. Prepare a CVP graph showing cost and revenue data for shop 48 from a zero level activity up to 17,000 pairs of shoes sold in a year, what would be shop 48's net operating income or loss?
3. If 12,000 pairs of shoes are sold in a year what would be shop 48's net operating income?
4. The company is considering paying the store manager of shop 48 an incentive commission of 75 cents per pair of shoes. If this change is made what will be the new break even point in dollar and sales in unit sales?
5. Referring to the original data, if the company is considering paying the store manager 50 cents commission on each pair of shoes sold in excess of the break even point. If this change is made, what will be the shop's net operating income or loss if 15,000 pairs of shoes are sold?

Solution Summary

This posting provides solution to CVP analysis questions for example of shoe manufacturing.

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