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ailings Review View Help CASE PRESENTATION 4: CVP and Analysis of Changes Townsend Footwear Ltd is a Hamilton company that manufactures sports shoes designed specifically with sportspeople in mind. The company gold 15,000 pairs of shoes last year at a price of $120 per pair. Last year's total costs of manufacture amounted to: Direct Costs: Direct Labour Direct Material 450,000 645,000 Indirect Costs: Variable Overhead Fixed Overhead Total Cost 75,000 225.000 $1,395.000 In an attempt to improve the product and make it more suited to professional sports people use, the company is considering for next year replacing a direct material component that has a cost of $15 with a superior material costing $25. To make the improvements a new machine will have to be leased to cope with the new material; this move would increase fixed overheads by $45,000 per year. Required: 1. Required: 1. What was Townsend Footwear Ltd's break-even point in volume and dollar sales last year? Explain what this figure means. What would the margin of safety percentage be at sales of 15,000 pairs? Explain what this figure means Construct a cost volume profit model of last year's scenario clearly marking the break- even point and margin of safety. How many pairs of shoes would the company have had to sell in the last year to eam an operating profit of $420,6067 . If Townsend Footwear Ltd holds the sales price constant and makes the suggested improvements, how many pairs of shoes must be sold in the coming year for the company to break even? If the company holds the sales price constant and makes the suggested improvements, how many pairs of shoes will have to be sold to make the same operating profit as last year? What would be the net operating profit if the sales price was raised to $135 and sales volume was increased to 17,500 pairs of shoes with the improvement having been implemented? | Explain the importance of cost volume protit analysis for management decision making