# CVP, alternative cost structures.  Classical Glasses operates a kiosk at the local mall, selling sunglasses for \$30 each. Classical Glasses currently pays \$1,000 a month to rent the space and pays two full-time employees to each work 160 hours a month at \$10 per hour. The store shares a manager with a neighboring kiosk and pays 50% of the manager’s annual salary of \$60,000 and benefits of \$12,000. The wholesale cost of the sunglasses to the company is \$10 a pair.Required:How many sunglasses does Classical Glasses need to sell each month to break even?If Classical Glasses wants to earn an operating income of \$5,300 per month, how many sunglasses does the store need to sell?If the store’s hourly employees agreed to a 15% sales-commission-only pay structure, instead of their hourly pay, how many sunglasses would Classical Glasses need to sell to earn an operating incomeof \$5,300?Assume Classical Glasses pays its employees hourly under the original pay structure, but is able to pay the mall 10% of its monthly revenue instead of monthly rent. At what sales levels would Classical Glasses prefer to pay a fixed amount of monthly rent, and at what sales levels would it prefer to pay 10% of its monthly revenue as rent

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CVP, alternative cost structures.  Classical Glasses operates a kiosk at the local mall, selling sunglasses for \$30 each. Classical Glasses currently pays \$1,000 a month to rent the space and pays two full-time employees to each work 160 hours a month at \$10 per hour. The store shares a manager with a neighboring kiosk and pays 50% of the manager’s annual salary of \$60,000 and benefits of \$12,000. The wholesale cost of the sunglasses to the company is \$10 a pair.

Required:

1. How many sunglasses does Classical Glasses need to sell each month to break even?
2. If Classical Glasses wants to earn an operating income of \$5,300 per month, how many sunglasses does the store need to sell?
3. If the store’s hourly employees agreed to a 15% sales-commission-only pay structure, instead of their hourly pay, how many sunglasses would Classical Glasses need to sell to earn an operating incomeof \$5,300?
4. Assume Classical Glasses pays its employees hourly under the original pay structure, but is able to pay the mall 10% of its monthly revenue instead of monthly rent. At what sales levels would Classical Glasses prefer to pay a fixed amount of monthly rent, and at what sales levels would it prefer to pay 10% of its monthly revenue as rent
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Step 1

1

Compute units of sunglasses to be sold to reach break-even point.

Step 2

2.

Compute number of Sunglasses to be sold to earn operating income of \$5,300 per month.

Step 3

3.

Compute number of Sunglasses to be sold to earn operating inc...

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