Barbara Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $49,200 in fixed costs to the $396,000 currently spent. In addition, Barbara is proposing that a 5% price decrease ($60 to $57) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $36 per pair of shoes. Management is impressed with Barbara's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. (a) Prepare a CVP income statement for current operations and after Barbara's changes are introduced.
Barbara Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $49,200 in fixed costs to the $396,000 currently spent. In addition, Barbara is proposing that a 5% price decrease ($60 to $57) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $36 per pair of shoes. Management is impressed with Barbara's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. (a) Prepare a CVP income statement for current operations and after Barbara's changes are introduced.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Barbara Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas
include the installation of a new lighting system and increased display space that will add $49,200 in fixed costs to the
$396,000 currently spent. In addition, Barbara is proposing that a 5% price decrease ($60 to $57) will produce a 20% increase in sales
volume (20,000 to 24,000). Variable costs will remain at $36 per pair of shoes. Management is impressed with Barbara's ideas but
concerned about the effects that these changes will have on the break-even point and the margin of safety.
(a)
Prepare a CVP income statement for current operations and after Barbara's changes are introduced.
BARGAIN SHOE STORE
CVP Income Statement
Current
New
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