Three largest of which include employee salaries

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Question: Assume Annie's Homemade divides its total annual sales of $650,000 into two sales channels: in-store sales and mobile sales. The in-store sales comprise 65% of total sales and the mobile sales account for 35% of total sales. The variable expense ratio is 30% for in-store sales and 40% for mobile sales. Variable expenses are a higher percentage of sales in the mobile sales segment because of various factors, such as price discounts offered to high-volume customers, packaging costs, and incremental fuel costs. Of the company's total annual fixed expenses of $240,000, $10,000 is traceable to in-store sales, $15,000 is traceable to mobile sales, and the remainder are common fixed expenses. The common fixed expenses-the three largest of which include employee salaries ($120,000), equipment depreciation ($40,000), and store rent ($36,000)-would be avoidable only if the company went out of business.

Reference no: EM133608665

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