Problem: CVP Analysis
SuperShades operates a kiosk at the local mall, selling sunglasses for $20 each. SuperShades currently pays $800 a month to rent the space and pays 2 full-time employees to work 40 hours a week at $10 per hour. The store shares a manager with a neighboring mall and pays 50% of the manager's $40,000 salary and benefits. (The manager's total benefits are 20% of her salary). The wholesale cost of the sunglasses to the company is $5 each.
a. How many sunglasses does SuperShades need to sell each month to break even?
b. If SuperShades wants to earn $4,500 per month after all expenses, how many sunglasses does the store need to sell?
c. If the store's hourly employees agreed to a 15% sales commission only pay structure, instead of their hourly pay, could the store get to its desired income of $4,500 faster?
d. Assume SuperShades pays its employees under the original hourly pay structure, but is able to pay the mall 20% of its monthly revenue instead of monthly rent. If the store would like to earn operating income of $4,500, what selling price would it need to charge customers if it wanted to maintain the level of units sold in question b above?