Question
Alice Oritz is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation
Alice Oritz is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $22,680 in fixed costs to the $230,580 currently spent. In addition, Alice is proposing that a 10% price decrease ($30 to $27.00) will produce a 20% increase in sales volume (21,000 to 25,200). Variable costs will remain at $12 per pair of shoes. Management are impressed with Alice's ideas but are concerned about the effects that these changes will have on the break-even point and the margin of safety. Calculate the current break-even point in units, and compare it with the break-even point in units if Alice's ideas are used. Current break-even point Break-even point if Alice's ideas are used units units
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