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Footwear, Inc., manufactures a complete line of men’s and women’s dress shoes for independent merchants

Footwear, Inc., manufactures a complete line of men’s and women’s dress shoes for independent merchants
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FINANCE

15-6A. (Break-even point and operating leverage) Footwear, Inc., manufactures a complete line of men’s and women’s dress shoes for independent merchants. The average selling price of its finished product is $85 per pair. The variable cost for this same pair of shoes is $58. Footwear, Inc., incurs fixed costs of $170,000 per year.
a. What is the break-even point in pairs of shoes for the company?
b. What is the dollar sales volume the firm must achieve to reach the break-even point?
c. What would be the firm’s profit or loss at the following units of production sold: 7,000 pairs of shoes? 9,000 pairs of shoes? 15,000 pairs of shoes?
d. Find the degree of operating leverage for the production and sales levels given in part (c).

 

FILE: MS WORD

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