Explore BrainMass

CVP Analysis


The Walkrite Shoe Company operates a chain of stores that sell 10 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 who is paid a fixed salary. Individual salespersons receive fixed salaries and sales commissions. Walkrite is considering opening another store whose details have been provided in the template BU315_W2_Ex1.xls.

View attachment for the template.

?Calculate the annual breakeven point in units sold and revenues.
?Calculate the store's operating income, if 35,000 units are sold.
?Calculate the annual breakeven point in units sold and revenues, if in addition to a fixed salary, the store manger is paid a commission of $0.30 per unit sold.
?The store is opened with the original plans. Due to an expected rise in the cost of shoes, a bulk order for 50,000 shoes is placed at a price of $19.50 per unit. However, at the end of the year, only 48,000 shoes are sold and a markdown of the remaining inventory to $18 is authorized. Salespersons are paid a commission of 5% of the revenues. Calculate the annual operating income for the store.


Solution Summary

Excel file shows calculations of break-even point in units sold and revenues and operating income.