Question

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Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store:

Sales price per pair of sandals	$	30
Variable expenses per pair of sandals		15
Contribution margin per pair of sandals	$	15
Fixed expenses per year:
Building rental	$	11,300
Equipment depreciation		11,300
Selling		9,000
Administrative		13,400
Total fixed expenses	$	45,000

3. Angie has decided that she must earn a profit of $22,500 the first year to justify her time and effort. How many pairs of sandals must be sold to attain this target profit?

Answer 1

Particulars		Amount ($)
Total Fixed Cost		45,000
Required Profit		22,500
Fixed Cost + Profit (a)		67,500
Contribution per pair of sandal(b)		15
Target sandal to be sold (a/b)		4,500
So, Angie should sell 4,500 pairs of Sandals to earn a profit of $ 22,500