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Nancy Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of

Nancy Willis is the advertising manager for Bargain 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 $10,000 in fixed costs to the $144,000 currently spent. In addition, Nancy 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 Nancys ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

(a)

Prepare a CVP income statement for current operations and after Nancys changes are introduced.

BARGAIN SHOE STORE CVP Income Statement

Current

New

select an income statement item SalesFixed ExpensesSelling ExpensesContribution MarginCost of Goods SoldAdministrative ExpensesGross ProfitNet Income/(Loss)Variable Expenses

$enter a dollar amount

$enter a dollar amount

select an income statement item Selling ExpensesFixed ExpensesNet Income/(Loss)Administrative ExpensesSalesCost of Goods SoldVariable ExpensesContribution MarginGross Profit

enter a dollar amount

enter a dollar amount

select a summarizing line for the first part Selling ExpensesNet Income/(Loss)Fixed ExpensesVariable ExpensesSalesContribution MarginCost of Goods SoldGross ProfitAdministrative Expenses

enter a total amount for the first part

enter a total amount for the first part

select an income statement item Cost of Goods SoldSalesContribution MarginAdministrative ExpensesFixed ExpensesNet Income/(Loss)Variable ExpensesSelling ExpensesGross Profit

enter a dollar amount

enter a dollar amount

select a closing name for this statement Contribution MarginAdministrative ExpensesSelling ExpensesFixed ExpensesGross ProfitNet Income/(Loss)Variable ExpensesCost of Goods SoldSales

$enter total net income or loss amount

$enter total net income or loss amount

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