Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 3.38P
CVP analysis, shoe stores. The HighStep 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. HighStep is considering opening another store that is expected to have the revenue and cost relationships shown here.
Consider each question independently.
- 1. What is the annual breakeven point in (a) units sold and (b) revenues?
Required
- 2. If 8,000 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 $15,500, 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 $2.00 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 $2.00 per unit in excess of the breakeven point, what would be the store’s operating income if 12,000 units were sold?
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Students have asked these similar questions
Aviator Station, Inc. operates a chain of high-end athletic apparel stores. The stores sell ten
different styles of sweatpants with identical unit costs and selling prices. A unit is defined as
one pair of sweatpants. Each store has a manager who is paid a fixed salary. Individual
salespeople receive a fixed salary and a sales commission. Aviator is trying to determine the
desirability of opening another store, which is expected to have the fallowing revenue and cost
relationships:
Per Pair
Unit variable data:
Selling price
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$200
$59.50
$4.50
$64
Sales commissions
Total variable costs
Annual fixed costs:
$360,000
$200,000
$180,000
$180,000
$920,000
Rent
Salaries
Advertising
Other fixed costs
Total fixed costs
5 Refer to the original data. If the store manager were paid $5.30 per unit sold in addition
to her current fixed salary, what would be the annual breakeven point in (a) units sold
and (b) revenues?
6 Refer to the original data. If the store manager were paid $5.30…
Columbus Inc. sells a high end hair dryer in a super competitive marketplace. As a result,
market research and competitive pressures influence the determination of their selling price.
Their marketing department has done a comprehensive analysis and It looks like a price of $61
would be appropriate given the present business environment.
The company has a goal of earning $30 on each unit.
What is the target unit cost of each hair dryer? Enter your answers without dollar signs or
commas.
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Required information
[The following information applies to the questions displayed below.]
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
$ 20.00
Selling price
Variable expenses:
Invoice cost
Sales commission
Total variable expenses
Fixed expenses:
Advertising
Rent
Salaries
Total fixed expenses
$ 6.50
5.50
$ 12.00
Annual
$ 42,000
32,000
160,000
$ 234,000
5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 55 cents
commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be Shop 48's net operating
income (loss) if 31,350 pairs of shoes are sold? (Do not round intermediate…
Chapter 3 Solutions
Cost Accounting (15th Edition)
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Prob. 3.18ECh. 3 - Prob. 3.19ECh. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - Prob. 3.21ECh. 3 - Prob. 3.22ECh. 3 - Prob. 3.23ECh. 3 - Prob. 3.24ECh. 3 - Prob. 3.25ECh. 3 - Prob. 3.26ECh. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.28ECh. 3 - Prob. 3.29ECh. 3 - Prob. 3.30ECh. 3 - Prob. 3.31ECh. 3 - Prob. 3.32ECh. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - Prob. 3.34PCh. 3 - Prob. 3.35PCh. 3 - Prob. 3.36PCh. 3 - Prob. 3.37PCh. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - Prob. 3.39PCh. 3 - Prob. 3.40PCh. 3 - Prob. 3.41PCh. 3 - Prob. 3.42PCh. 3 - Prob. 3.43PCh. 3 - Prob. 3.44PCh. 3 - Prob. 3.45PCh. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.47PCh. 3 - Prob. 3.48PCh. 3 - Deciding where to produce. (CMA, adapted) Portal...
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