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| Teaching Since: | May 2017 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
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 ($38 to $36) will produce a 20% increase in sales volume (19,710 to 23,652). 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.
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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
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Compute the margin of safety ratio for current operiations and after svetlanas changes are introduce.
Current Percentage _____%
New Percentage _____%
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Prepare CVP income statement for current operations and after Svetlanas changes are introduced.
BARGAIN SHOE STORE
CVP Income Statement
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Current New
Sales __________ __________
Variable Expenses __________ __________
Contribution margin __________ __________
Fixed Expenses __________ __________
Net Income __________ __________
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Would you make the changes suggested? Y/N?
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