Question 3 (20 marks) Sammy is the marketing officer for Sure-win Sportswear Store. She is currently...

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Question 3 (20 marks) Sammy is the marketing officer for Sure-win Sportswear 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 $24,000 in fixed costs to the $270,000 currently spent. In addition, Sammy is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of running shoes. The manager agreed with Sammy's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. From the information, determine the total amount of: (a) Compute the current break-even point in units and compare it to the break-even point in units if Sammy's ideas are used. (6 marks) (b) Compute the margin of safety ratio for current operations and after Sammy's changes are introduced. (Round to the nearest 1 percent) (6 marks) (c) Prepare a CVP income statement for current operations and after Sammy's changes are introduced. (Show column for total amounts only.) Discuss whether you would make the changes suggested. (8 marks) Question 3 (20 marks) Sammy is the marketing officer for Sure-win Sportswear 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 $24,000 in fixed costs to the $270,000 currently spent. In addition, Sammy is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of running shoes. The manager agreed with Sammy's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. From the information, determine the total amount of: (a) Compute the current break-even point in units and compare it to the break-even point in units if Sammy's ideas are used. (6 marks) (b) Compute the margin of safety ratio for current operations and after Sammy's changes are introduced. (Round to the nearest 1 percent) (6 marks) (c) Prepare a CVP income statement for current operations and after Sammy's changes are introduced. (Show column for total amounts only.) Discuss whether you would make the changes suggested. (8 marks)