The Following are financial information of a jewelry shop: Exhibit 1 Hallstead Jewelers; Income Statements for Years Ended January 31 (thousands of dollars)
	2003	2004	2006
Sales	$8,583	$8,102	$10,711
Cost of goods sold	4,326	4,132	5,570
Gross margin	$4,257	$3,970	$5,141
Expenses
Selling expense
Salaries	2,021	2,081	3,215
Commissions	429	405	536
Advertising	254	250	257
Administrative expenses	418	425	435
Rent	420	420	840
Depreciation	84	84	142
Miscellaneous expenses	53	93	122
Total expenses	$3,679	$3,758	$5,547
Net income	$ 578	$ 212	$ (406)

Exhibit 2 Hallstead Jewelers Operating Statistics
	2003	2004	2006
Sales space (square feet)	10,230	10,230	15,280
Sales per square foot	$839	$792	$701
Sales tickets	5,341	5,316	6,897
Average sales ticket	$1,607	$1,524	$1,553

1. One idea that the shop had was to reduce prices to bring in more customers. If average prices were reduced 10%, and the number of sales tickets (unit sales) increased to 7,500, would the company's income be increased? With prices reduced, what would be the new breakeven point in sales tickets and sales dollars ?

2. Another idea the owner had was to eliminate sales commissions, how would the elimination of sales commissions affect the breakeven volume?

3. If the owner increase advertising by $200,000, how would this affect the breakeven point? Would you recommend the owners to try this?