Project #57530 - Nielsen’s Fine Clothing Store

Nielsen’s Fine Clothing Store


You are the owner of a general retail clothing store.  Below is the income statement for last year which is not expected to change at all during the upcoming fiscal year.  You have one full time manager, two three quarter time assistant managers and 3 part time clerks.  You have had the manager and assistant managers for the past five years.  Five years ago sales were only 350,000 dollars.  As sales have increased you have added the part time clerks.  You anticipate adding more clerks as sales increase in the future.  You pay you credit card vendor 1 percent of sales.  Bad debt expense and shrinkage are also estimated as a percentage of sales.  The Mall common area payment must be paid regardless of how many sales you make.  In addition, your ex-husband must get paid alimony and child support each month (which you pay from the owner’s salary).


1.  Please calculate the pretax breakeven point. (20 points)


2.  What happens to your breakeven point if your primary supplier of clothing raises prices 5%? You buy 45% of your clothing from this company. (10 points)


3.  Your manager has received an offer of employment from a competitor.  She would make 25% more than you are paying her now.  If you match this offer, what is the impact upon your breakeven point (what will the new breakeven point be) ? (10 points)

Please show the calculations with your answers.


Revenues                                         $650,000


Managers’s Salaries & Benefits          25,000

Asst. Managers’ Wages                       35,000

Clerical Wages                                     29,000

Owner’s Salary                                    55,000

Rent (4% of gross revenue)                 13,000

Mall Common  Area Payment             25,000

Phone Bill                                              5,000

Property Insurance                                7,000

Property Taxes                                      5,000

Office Supplies                                     2,000

Postage                                                     500

Equipment Expenses                             5,000

Shrinkage                                               4,000

Bad Debt Expense                                15,000

Credit Card Expense                              6.500

Wholesale Clothing Purchases           380,000


Total Expenses                                    612,000



Net Operating Income                           38,000                

Subject Mathematics
Due By (Pacific Time) 02/16/2015 12:00 am
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