question archive Mary Willis is the advertising manager for Bargain Shoe Store
Mary Willis is the advertising manager for Bargain Shoe Store
Subject:AccountingPrice: Bought3
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 $32,400 in fixed costs to the $417,000 currently spent. In addition, Mary 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 Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
(a) Compute the current break-even point in units, and compare it to the break-even point in units if Mary’s ideas are used. (Round answers to 0 decimal places, e.g. 1,225.)
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Current break-even point |
pairs of shoes |
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New break-even point |
pairs of shoes |
(b) Compute the margin of safety ratio for current operations and after Mary’s changes are introduced.(Round answers to 0 decimal places, e.g. 15%.)
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Current margin of safety ratio |
% |
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New margin of safety ratio |
% |
(c) Prepare a CVP income statement for current operations and after Mary’s changes are introduced.
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BARGAIN SHOE STORE |
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Current |
New |
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Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses |
$ |
$ |
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Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses |
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Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses |
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Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses |
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Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Expenses |
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