SOLUTION: The Paduka Shoe Company sells five different styles of ladies chappals with identical costs and selling prices. The company is trying to find out the profitability of opening ano

Question 1195102: The Paduka Shoe Company sells five different styles of ladies chappals with identical costs and
selling prices. The company is trying to find out the profitability of opening another store, which
will have the following expenses and revenues:
Per pair
Selling price Tk. 30.00
Variable cost Tk. 19.50
Salesmen’s commission Tk. 1.50
Total Variable cost Tk. 21.00
Annual fixed expenses are:
Rent Tk. 60,000
Salaries Tk. 2,00,000
Advertising Tk. 80,000
Other fixed expenses Tk. 20,000
Tk. 3,60,000
a. Calculate the annual Break-Even point in units and in value. Also determine the profit or
loss if 35,000 pairs of chappals are sold.
b. The sales commissions are proposed to be discontinued, but instead a fixed amount of
Tk. 90,000 is to be incurred in fixed salaries. A reduction in selling price of 5% is also
proposed. What will be the Break-Even points in units?
c. It is proposed to pay the store manager 50 paisa per unit as further commission. Selling
price is proposed to be increased by 5%. What would be the Break-Even points in units?
d. Refer to the original data if the store manager were to be paid 30 paisa commission on
each pair of chappal sold in excess of Break-Even point, what would be the store’s net
profit, if 50,000 were sold?
Answer by ikleyn(52786) (Show Source): You can put this solution on YOUR website!
.

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