Grant's Western Wear is a retailer of western hats located in Atlanta, Georgia. Although Grant's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really humming, and sales growth at Grant's has been great. However, the business is very competitive, and Grant has relied on its knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other western wear stores. Also, because of the rapid growth in sales, Grant is finding it more difficult to manage certain aspects of the business, such as restocking of inventory and hiring and training new salespeople. Sales price $ 39.00 Per-unit variable costs: Invoice cost 18.75 Sales commissions 5.55 Total per-unit variable costs $ 24.30 Total annual fixed costs: Advertising $ 24,150 Rent 30,300 Salaries 126,300 Total fixed costs $ 180,750 The annual breakeven point in unit sales is calculated to be:
Grant's Western Wear is a retailer of western hats located in Atlanta, Georgia. Although Grant's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really humming, and sales growth at Grant's has been great. However, the business is very competitive, and Grant has relied on its knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other western wear stores. Also, because of the rapid growth in sales, Grant is finding it more difficult to manage certain aspects of the business, such as restocking of inventory and hiring and training new salespeople.
| Sales price | $ | 39.00 | |
| Per-unit variable costs: | |||
| Invoice cost | 18.75 | ||
| Sales commissions | 5.55 | ||
| Total per-unit variable costs | $ | 24.30 | |
| Total annual fixed costs: | |||
| Advertising | $ | 24,150 | |
| Rent | 30,300 | ||
| Salaries | 126,300 | ||
| Total fixed costs | $ | 180,750 | |
The annual breakeven point in unit sales is calculated to be:
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