Executive Shirt Printing Case Study
Original Data:
Selling Price: 40.00 Variable Expenses: Invoice Cost: 18.00 Sales Commission: 7.00
Total Variable Expenses: 25.00 Fixed Expenses: Rent: 80,000.00 Advertising: 150,000.00 Salaries: 70,000.00
Total Fixed Expenses: 300,000.00
1. Calculate the annual break-even point in dollar sales and in unit sales for Store 36.
Unit Contribution Margin = selling price per unit – variable Expenses
Unit Contribution Margin = 40.00 – 25.00
Unit Contribution Margin = 15.00 per shirt
Break even point = (target profit + fixed expenses) / unit contribution margin
Break even point = (0.00 + 300,000.00) / 15.00
Break even point = 20,000 units
Break even point in sales = 20,000 x 40 = 800,000 …show more content…
Prepare a CVP graph showing cost and revenue data for Store 36 from zero shirts up to 30,000 shirts sold each year. Clearly indicate the break-even point on the graph.
3. If 19,000 shirts are sold in a year, what would be Store 36’s net operating income or loss?
Sales (19,000 shirts x 40 per shirt) 760,000
Variable Expenses (19,000 shirts x 25 per shirt) (475,000)
Contribution Margin 285,000
Fixed expenses (300,000)
Net operating Loss (15,000)
4. The company is considering paying the store manager of Store 36 an incentive commission of $3 per shirt (in addition to salespersons’ commissions). If this change is made, what will be the new break-even point in dollar sales and in unit sales?
$3.00 added commission increases the new variable price to $28
New Data:
Selling Price: 40.00 Variable Expenses: Invoice Cost: 18.00 Sales Commission: 7.00 Manager Commission: 3.00
Total Variable Expenses: 28.00 Fixed Expenses: Rent: 80,000.00 Advertising: 150,000.00 Salaries: 70,000.00
Total Fixed Expenses: 300,000.00
Contribution Margin = 40.00 – 28.00 = 12.00 new contribution margin
Break even point = (0.00 + 300,000) / 12.00 = 25,000 breakeven point in
Selling Price: 40.00 Variable Expenses: Invoice Cost: 18.00 Sales Commission: 7.00
Total Variable Expenses: 25.00 Fixed Expenses: Rent: 80,000.00 Advertising: 150,000.00 Salaries: 70,000.00
Total Fixed Expenses: 300,000.00
1. Calculate the annual break-even point in dollar sales and in unit sales for Store 36.
Unit Contribution Margin = selling price per unit – variable Expenses
Unit Contribution Margin = 40.00 – 25.00
Unit Contribution Margin = 15.00 per shirt
Break even point = (target profit + fixed expenses) / unit contribution margin
Break even point = (0.00 + 300,000.00) / 15.00
Break even point = 20,000 units
Break even point in sales = 20,000 x 40 = 800,000 …show more content…
Prepare a CVP graph showing cost and revenue data for Store 36 from zero shirts up to 30,000 shirts sold each year. Clearly indicate the break-even point on the graph.
3. If 19,000 shirts are sold in a year, what would be Store 36’s net operating income or loss?
Sales (19,000 shirts x 40 per shirt) 760,000
Variable Expenses (19,000 shirts x 25 per shirt) (475,000)
Contribution Margin 285,000
Fixed expenses (300,000)
Net operating Loss (15,000)
4. The company is considering paying the store manager of Store 36 an incentive commission of $3 per shirt (in addition to salespersons’ commissions). If this change is made, what will be the new break-even point in dollar sales and in unit sales?
$3.00 added commission increases the new variable price to $28
New Data:
Selling Price: 40.00 Variable Expenses: Invoice Cost: 18.00 Sales Commission: 7.00 Manager Commission: 3.00
Total Variable Expenses: 28.00 Fixed Expenses: Rent: 80,000.00 Advertising: 150,000.00 Salaries: 70,000.00
Total Fixed Expenses: 300,000.00
Contribution Margin = 40.00 – 28.00 = 12.00 new contribution margin
Break even point = (0.00 + 300,000) / 12.00 = 25,000 breakeven point in