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

Alternative

3

Alternative

4

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.)

	Percent change in
Alternative	operating income		Meet or Exceed?
1		%
2		%
3		%
4		%

What should

Mersey ?do?

?