Mary 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 $19,000 in fixed costs to the $128,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($20 to $19) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $12 per pair of shoes. Management is impressed with Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Mary 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 $19,000 in fixed costs to the $128,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($20 to $19) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $12 per pair of shoes. Management is impressed with Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

 

 

 

Prepare a CVP income statement for current operations and after Mary's changes are introduced.
BARGAIN SHOE STORE
CVP Income Statement
Current
New
$
$
Would you make the changes suggested?
$
$
Transcribed Image Text:Prepare a CVP income statement for current operations and after Mary's changes are introduced. BARGAIN SHOE STORE CVP Income Statement Current New $ $ Would you make the changes suggested? $ $
Compute the current break-even point in sales units, and compare it to the break-even point in sales units if Mary's ideas are
implemented. (Round answers to 0 decimal places, e.g. 5,275.)
Current break-even point
pairs of shoes
New break-even point
pairs of shoes
Transcribed Image Text:Compute the current break-even point in sales units, and compare it to the break-even point in sales units if Mary's ideas are implemented. (Round answers to 0 decimal places, e.g. 5,275.) Current break-even point pairs of shoes New break-even point pairs of shoes
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