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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

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?