Question
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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