OrioleWillis 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 $39,000in fixed costs to the $423,000currently spent. In addition,Orioleis proposing that a 5% price decrease ($60to $57) will produce a20% increase in sales volume (20,000to24,000). Variable costs will remain at $36per pair of shoes. Management is impressed withOriole's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

Compute the margin of safety ratio for current operations and afterOriole's changes are introduced.

Current margin of safety ratio

New margin of safety ratio