Cost Behavior and Breakeven Analysis
COMM Company sells clothing for young adults. The firm has normal monthly fixed costs of $90,000 ($38,000 of this amount is fixed salaries). The firm's variable cost ratio averages 60%. The firm operates 3 stores in the mid-Atlantic region.
1. From the employees' perspective, what level of monthly sales dollars must COMM achieve so that their monthly compensation under the combination fixed salary/commission model is equal to the current monthly fixed salary amount (currently $38,000).
2. Prepare commentary (about 1/2 page) that reviews / evaluates the pros and cons of making the proposed compensation structure change. I'm looking for a well-rounded response that reflects upon changes in breakeven point, likely impact on employee morale / motivation, MSM operating profit at different sales levels, etc