The Following Details Relates To A Shop Which Curr... Chegg.com

School: Copperbelt University - Course: FIN 722 - Subject: Accounting

Question:The following details relates to a shop which currently sells 25,000 pairs of shoes annually. &nb... The following details relates to a shop which currently sells 25,000 pairs of shoes annually. K'000 Selling price per pair of shoes 40 Purchase cost per pair of shoes 25 Total annual fixed costs K'000 Salaries 100,000 Advertising 40,000 Other fixed expenses 100,000 You are required: Answer each part independently of data contained in other parts of the requirement. a. Calculate the break-even point and margin of safety in number of pairs of shoes sold. b. Assume that 20,000 pairs of shoes were sold in a year. Calculate the shop's net income (or loss). c. If a selling commission of K2,000 per pair of shoes sold was to be introduced, how many pairs of shoes would need to be sold in a year in order to earn a net income of K10m? d. Assume that for next year an additional advertising campaign costing K20m is proposed, whilst at the same time selling prices are to be increased by 12%. e. What would be the break-even point in number of pairs of shoes? (25 marks) Comments Expert Answer

4/6/22, 2:23 AMThe Following Details Relates To A Shop Which Curr... | Chegg.com file:///C:/Users/Mr Mkandawire/Downloads/Telegram Desktop/Chegg_answer9288.html2/3Anonymous answered this Was this answer helpful? 234 answers Anonymous 234 answers Ans. A). Break even point= fixed cost/contribution per unit = 240000000/15000=16000 pair of shoes Fixed cost= salaries+ advertising+ other fixed cost = 100000000+40000000+100000000=k240000000 Contribution per unit= sale price per unit- variable cost per unit = 40000-25000=k15000 per unit Margin of safety= current sales unit- break even sale unit = 25000-16000=9000 pair of shoes