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 $12,600 in fixed costs to the $198,450 currently spent. In addition, Alice is proposing that a 10% price decrease ($25 to $22.50) will produce a 20% increase in sales volume (21,000 to 25,200). Variable costs will remain at $10 per pair of shoes. Management are impressed with Alices ideas but are concerned about the effects that these changes will have on the break-even point and the margin of safety.

1. Calculate the current break-even point in units, and compare it with the break-even point in units if Alices ideas are used.

2.Calculate the margin of safety ratio for current operations and after Alices changes are introduced.