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Elizabeth Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of
Elizabeth 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 $34,200 in fixed costs to the $411,000 currently spent. In addition, Elizabeth is proposing that a 5% price decrease ($60 to $57) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $36 per pair of shoes. Management is impressed with Elizabeth's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. Prepare a CVP income statement for current operations and after Elizabeth's changes are introduced. BARGAIN SHOE STORE CVP Income Statement Current > > $ $ Would you make the changes suggested? $ New Compute the current break-even point in sales units, and compare it to the break-even point in sales units if Elizabeth's ideas are implemented. (Round answers to O decimal places, e.g. 5,275.) Current break-even point New break-even point eTextbook and Media pairs of shoes pairs of shoes Compute the margin of safety ratio for current operations and after Elizabeth's changes are introduced. (Round answers to 0 decimal places, e.g. 15%.) Current margin of safety ratio New margin of safety ratio eTextbook and Media % %
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