Question

The Fashion Shoe Company operates a chain of women’s 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 company’s many outlets:

		Per Pair of Shoes
Selling price		$	30.00
Variable expenses:
Invoice cost		$	11.00
Sales commission			4.00
Total variable expenses		$	15.00
			Annual
Fixed expenses:
Advertising		$	33,000
Rent			23,000
Salaries			115,000
Total fixed expenses		$	171,000

3. If 10,600 pairs of shoes are sold in a year, what would be Shop 48’s net operating income (loss)?

Answer 1

Particulars	Amount
Selling price		30*10,600 =$318,000
Less: Variable Expenses		$ (159,000)
Invoice cost	11*10,600 =$116,600
Sales commission	4*10,600 =$42,400
Less: Fixed Expenses		$ (171,000)
Advertising	$    33,000
Rent	$    23,000
Salaries	$ 115,000
Net Operating Income/(loss)	$   (12,000)