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Jin et al., 2010a

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Pairs sold Revenues (25,000 pairs $40 per pair) Total cost of shoes (25,000 pairs $29 per pair) Sales commissions on first 19,000 pairs (19,000 pairs $2 per pair) Sales commissions on additional 6,000 pairs [6,000 pairs ($2 + $1.50 per pair)] Total variable costs Contribution margin Fixed costs 3-44 $ 7.50 22,800 $912,000 25,000 $1,000,000 725,000 38,000 21,000 784,000 216,000 171,000 EA Operating income $ 45,000 Alternative approach: Breakeven point in units = 19,000 pairs Store manager and store supervisor receive commission of $1.50 ($1+$0.50) on 6,000 (25,000 19,000) pairs