11,000 pairs × $30.00 per pair = $330,000 in sales.
Although the change will lower the break-even point from 12,500 pairs
to 11,000 pairs, the company must consider whether this reduction in
the break-even point is more than offset by the possible loss in sales
arising from having the sales staff on a salaried basis. Under a salary ar-
rangement, the sales staff has less incentive to sell than under the pre-
sent commission arrangement, resulting in a potential loss of sales and
a reduction of profits. Although it is generally desirable to lower the
break-even point, management must consider the other effects of a
change in the cost structure. The break-even point could be reduced
dramatically by doubling the selling price but it does not necessarily fol-
low that this would improve the company’s profit.
Problem 6-19 (60 minutes)
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