Mary Willis is the advertising manager for Grouper 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 $21,800 in fixed costs to the $128,000 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) Compute the current break-even point in units, and compare it to the break-even point in units if Marys ideas are used. (Round answers to 0 decimal places, e.g. 1,225.) Current break-even point pairs of shoes New break-even point pairs of shoes (b) Compute the margin of safety ratio for current operations and after Marys changes are introduced. (Round answers to o decimal places, e.g. 15%.) % Current margin of safety ratio New margin of safety ratio % (c) Prepare a CVP income statement for current operations and after Mary s changes are introduced. BARGAIN SHOE STORE CVP Income Statement Current New $ S Administrative Expenses Contribution MarginCost of Goods SoldFixed Expenses Gross ProfitNet Income/(Loss) Sales Selling Expenses Variable Expenses Administrative Expenses Contribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss) Sales Selling Expenses Variable Expenses Administrative Expenses Contribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss) Sales Selling Expenses Variable Expenses Administrative Expenses Contribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss) Sales Selling Expenses Variable Expenses $ $ Administrative Expenses Contribution MarginCost of Goods SoldFixed Expenses Gross ProfitNet Income/(Loss) Sales Selling Expenses Variable Expenses Would you make the changes suggested? No Yes