Samad Al-Khalil is the advertising manager for Payless Shoe Store. He is currently working on a major promotional campaign. His ideas include installing a new lighting system and increased display space that will add $34,000 in fixed costs to the $270,000 currently spent. In addition, Samad proposes that a 5% sales price decrease (from $40 to $38) will produce a 20% increase in sales volume (from 20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Samads ideas but concerned about the effects these changes will have on the break-even point.

Instructions: Use the MS Excel tool to solve the following:

(a) Compute the current break-even point in units and compare it to the break-even point in units using Samads new ideas.

(b) Prepare a CVP income statement for current operations and after Samads changes are introduced.

c) Would you make the changes suggested? Explain why.