The Chelsea Shoe Company produces its famous shoe, the Divine Loafer that sells for $45 per pair. Operating income for 2012 is as follows:

Sales revenue ($45 per pair) $270,000

Variable cost ($25 per pair) 150,000

Contribution margin 120,000

Fixed cost 72,000

Operating income $48,000

Chelsea Shoe Company would like to increase its profitability over the next year by at least 25%. To doso, the company is considering the following options:

1.	Replace a portion of its variable labor with an automated machining process. This would result in a 20% decrease in variable cost per unit, but a 15% increase in fixed costs. Sales would remain the same.
2.	Spend $10,000 on a new advertisingcampaign, which would increase sales by 10%.
3.	Increase both selling price by $10 per unit and variable costs by $6 per unit by using a higher quality leather material in the production of its shoes. The higher priced shoe would cause demand to drop by 15%.
4.	Add a second manufacturingfacility, which would double Chelsea's fixed costs but would increase sales by 40%.

Required

Evaluate each of the alternatives considered by Chelsea Shoes. Do any of the options meet or exceed Chelseas targeted increase in income of 25%? What should Chelsea do?