The WalkRite Shoe Company operates a chain of shoe stores that sell
10 different styles of inexpensive men’s 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 salespeople receive a
fixed salary and a sales commission. WalkRite is considering opening another store that is expected to have
the revenue and cost relationships shown here:
1
2
3
4
5
6
A B C D E
Selling price $30.00 Rent $ 60,000
Cost of shoes $19.50 Salaries 200,000
Sales commission 1.50 Advertising 80,000
Variable cost per unit $21.00 Other fixed costs 20,000
Total fixed costs $360,000
Unit Variable Data (per pair of shoes) Annual Fixed Costs
Consider each question independently: Required
1. What is the annual breakeven point in (a) units sold and (b) revenues?
2. If 35,000 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 $81,000, 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 manager is paid a commission of
$0.30 per unit sold, 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 manager is paid a commission
of $0.30 per unit in excess of the breakeven point, what would be the store’s operating income if
50,000 units were sold?
