Question
Scenario Mary Willis is the advertising manager for bargain shoe store. she is currently working on a major promotional campaign. Her ideas include the installation
Scenario Mary 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 $24,000 in fixed costs to the $270,000 in fixed cost currently spent. iIn addition Mary Is proposing 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 shoes. Management is impressed with Mary's ideas but concerned about the effects these changes will have on the break-even point and the margin of safety. complete the following: 1) compute the current break-even points in units, and compare it to the break-even point in Mary's ideas are used. 2)Compute the margin of safety ratio for current operations and after Mary's changes are introduced (round to the nearest full percent). 3)Prepare a CVP(Cost-Volume-Profit) income statement for current operations and after Mary's changes are introduced. prepare: a minimum of 700 word informal memo to management addressing Mary's suggested changes. explain: Whether Mary's changes should be adopted. why or why not? Analyze the above information ( the three bullet points above) and use this information to support your suggestion.
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