Sharon Willis is the advertising manager for Bargain Shoe Store.She is currently working on a major promotional campaign. Her ideasinclude the installation of a new lighting system and increaseddisplay space that will add $18,200 in fixed costs to the $133,000currently spent. In addition, Sharon is proposing that a 5% pricedecrease ($20 to $19) will produce a 20% increase in sales volume(20,000 to 24,000). Variable costs will remain at $12 per pair ofshoes. Management is impressed with Sharon’s ideas but concernedabout the effects that these changes will have on the break-evenpoint and the margin of safety.

(a)Prepare a CVP income statement for current operations andafter Sharon’s changes are introduced.

(b)Compute the current break-even point in sales units, andcompare it to the break-even point in sales units if Sharon’sideas are implemented. (Round answers to 0 decimalplaces, e.g. 5,275.)

(c) Compute the margin of safetyratio for current operations and after Sharon’s changes areintroduced. (Round answers to 0 decimal places,e.g. 15%.)