Original Break-even calculations (page 891)

Sales (total number of shoes sold in a month x selling price each shoe)	100,000
Variable costs (40%)	(40,000)
Contribution margin (Sales - Variable costs)	60,000
Fixed costs - given	(35,000)
Operating income (Contribution margin - fixed cost)	25,000
Break-even point (fixed costs / variable costs per unit) =	583.33 units

Note: Please delete all red text provided in the template before submitting the assignment.

Respond to the following:

• How did you calculate the original operating income and break-even point before changes?
  • Detail how you calculated contribution margin, operating income, and break-even point.

2) Revised Break-even after extra $1,500 of advertising

Sales New Sales (new sales volume x selling price of each shoe) ((50% x 1,000) + 1,000) x $100	150,000
Variable costs (original 40% + $2/pair) (Selling price x new variable cost/pair)	63,000
Contribution margin (Sales - Variable Costs)	87,000
Fixed costs (original fixed costs + additional marketing cost) (35,000 + 1,500)	36,500
Operating income (Contribution margin - fixed cost)	50,500
Break-even point (fixed costs / variable costs per unit) =	629.31=

• Given the results of your calculations above compare the pros and cons or each of the two break-even results (1 paragraph pros, 1 paragraph cons)
• Make a recommendation on whether the company should change or not. (1 paragraph)