Svetlana pace is the advertising manager for bargain shoe, Ask an Expert

Accounting

Svetlana Pace 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 $38,230 in fixed costs to the $274,220 currently spent. In addition, Svetlana is proposing that a 5% price decrease will produce a 20% increase in sales volume . Variable costs will remain at $21 per pair of shoes. Management is impressed with Svetlana's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
Compute the current break even point in units, and compare it to the break even point in units if svetlanas ideas are used.

Current Break even point pairs of shoes
New Break even point pairs of shoes

Compute the margin of safety ratio for current operiations and after svetlanas changes are introduce.

Current Percentage _____%
New Percentage _____%

Prepare CVP income statement for current operations and after Svetlanas changes are introduced.

BARGAIN SHOE STORE
CVP Income Statement

Current New

Variable Expenses
Contribution margin
Fixed Expenses
Net Income

Would you make the changes suggested? Y/N?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9963330

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