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

1Compute units of sunglasses to be sold to reach break-even point.

Answered: CVP, alternative cost structures.…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

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Problem 5EA: Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of...

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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:

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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