Carla Vista Willis is the advertising manager for Bargain 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 $34,220 in fixed costs to the $318,600 currently spent. In addition, Carla Vista is proposing that a 5% price decrease ($40 to $38) will produce a 25% increase in sales volume (23,600 to 29,500). Variable costs will remain at $25 per pair of shoes. Management is impressed with Carla Vistas ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

Compute the current break-even point in units, and compare it to the break-even point in units if Carla Vistas ideas are used.

Current break-even point		enter current break-even point in units	pairs of shoes
New break-even point		enter new break-even point in units	pairs of shoes

Compute the margin of safety ratio for current operations and after Carla Vistas changes are introduced. (Round answers to 0 decimal places, e.g. 15%.)

Current margin of safety ratio		enter current margin of safety ratio in percentages	%
New margin of safety ratio		enter new margin of safety ratio percentages	%

Prepare a CVP income statement for current operations and after Carla Vistas changes are introduced.

BARGAIN SHOE STORE CVP Income Statement
		Current		New
select an income statement item Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses		$enter a dollar amount		$enter a dollar amount
select an income statement item Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses		enter a dollar amount		enter a dollar amount
select a summarizing line for the first part Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses		enter a total amount for the first part		enter a total amount for the first part
select an income statement item Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses		enter a dollar amount		enter a dollar amount
select a closing name for this statement Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses		$enter a total net income or loss amount		$enter a total net income or loss amount

Would you make the changes suggested?

select an option YesNo