The Mersey Shoe Company produces its famous shoe, the Divine Loafer that sells for $55 per pair. Operating income for 2017 is as follows:

Sales revenue ($55 per pair) $220,000

Variable cost ($20 per pair) 80,000

Contribution margin 140,000

Fixed cost 70,000

Operating income $70,000

Mersey Shoe Company would like to increase its profitability over the next year by at least 25%. To do so, 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 25% decrease in variable cost per unit, but a 10% increase in fixed costs. Sales would remain the same.

2. Spend $35,000 a new advertising campaign, which would increase sales by 40%.

3. Increase both selling price by $10 per unit and variable costs by $8 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 approximately15%.

4. Add a second manufacturing facility that would double Mersey's fixed costs, but would increase sales by 60%. Evaluate each of the alternatives considered by Mersey Shoes. (Use parentheses or a minus sign for an operating? loss.)

Alternative 1

Sales revenue

Variable cost

Contribution margin

Fixed cost

Operating income (loss)

Alternative 2

Sales revenue

Variable cost

Contribution margin

Fixed cost

Operating income (loss)

Alternative 3

Sales revenue

Variable cost

Contribution margin

Fixed cost

Operating income (loss)

Alternative 4

Sales revenue

Variable cost

Contribution margin

Fixed cost

Operating income (loss)

Do any of the options meet or exceed Mersey targeted increase in income of 25%? ?(Round your answers to the nearest whole percent. Use parentheses or a minus sign for a negative percentage change.) what is the percent change in each alternative? Does it meet or exceed the target? Which option should Mersey choose?