Jimmy has recently opened Shoes Store specializing in sportshoes. Jimmy has just completed a course in managerial accounting, and he believes that he can apply certain aspects of the course to his business. He is particualrly interested in adopting the cost-volume-profit (CVP) approach to decision making. Thus, he has prepared the following analysis: Sales price per pair of shoes $72 Variable expense per pair of shoes $53 - Contribution margin per pair of shoes $19 Fixed expense per year: Building rental $15,000 Equipment depreciation $ 5,000 Selling $ 33,000 Administrative $ 17,000 + Total fixed expense $70,000

Required: 1. How many pairs of shoes must be sold to break even? What does this represent in total dollar sales? 2. How many pairs of shoes must be sold to earn a $12,500 target profit for the first year?

3. Jimmy now has one full-time and one part-time sales-person working in the store. It will cost him an additional $11,000 per year to convert the part time position to a full-time position. Jimmy believes that the change would bring in an additional $14,500 in sales each year. Should he convert the position? Use the incremental approach.