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John Lim is the advertising manager for Klassy Shoe Shop. He is currently working on a major promotional campaign. His ideas include the installation of
John Lim is the advertising manager for Klassy Shoe Shop. He is currently working on a major promotional campaign. His ideas include the installation of a new lighting system and increased display space that will add RM37,000 in fixed costs to the RM210,000 currently spent. In addition, John is proposing that a 62/3% price decrease (from RM 30.00 to RM28.00) will produce an increase in sales volume from 16,000 to 21,000 units. Variable costs will remain at RM15.00 per pair of shoes. The management is considering whether or not to approve the proposal by John. Required: Prepare a Contribution (CVP) Income Statement for the current operations and after John's changes are introduced. Explain to the management whether they should approve or reject the proposal by John. (12 marks)
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