Basic Cvp

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Basic CVP Analysis

Erica Holloman

BUS630 – Managerial Accounting

Oscar Lewis

October 30, 2011

The Fashion Shoe Company operates a chain of women's shoe shops around the country. The shops carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a substantial commission on each pair of shoes sold (in addition to a small basic salary) in order to encourage them to be aggressive in their sales efforts.
The following worksheet contains cost and revenue data for Shop 48 is typical of the company's many outlets.

Per Pair of Shoes
Selling price $ 30.00

Variable expenses
Income cost $ 13.50 sales commission 4.50
Total variable expenses --------------------------------- $ 18.00

Annual
Fixed expenses: Advertising $ 30,000 Rent 20,000 salaries 100,000
Total fixed expenses----------------------------------- $ 150,000

1. Calculate the annual break-even point in dollar sales and in unit sales for Shop 48.

Fixed Costs=F=$150,000

Variable Cost per pair=V=$18

Selling price=P=$30

BEP in units=F/ (P-V) =150000/ (30-18) =12500 pairs

BEP in dollars=BEP in units*P=12500*30=$375000

2. Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17, 000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph.

|Sales, Q |Total Revenue |Fixed Cost, F |Variable…...

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