Mary Willis is the advertising manager for Culver 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 $14,000 in fixed costs to the $133,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($20 to $19) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $12 per pair of shoes. Management is impressed with Marys ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

A)

Current break-even point_____________ pairs of shoes

New break-even point________________pairs of shoes

B)

Current Margin of safety ratio _________%

New margin of safety ratio _________%

C)

Prepare a cup income statement for current operations and after Mary's changes are introduced.

Income statement :