No results Options v Return to Blackboard Weygandt, Managerial Accounting, 7e He
ID: 2409601 • Letter: N
Question
No results Options v Return to Blackboard Weygandt, Managerial Accounting, 7e Help 1 5ystem Announcements CALCULATos Problem 5-4A Mary Wilis is the advertising manager for Bargain Shoe Store. $57,600 in fixed costs to the $387,600 currently spent. In addition, Mary is proposing that a 5% price decrease (560 to $57) will $36 per pair of shoes. Management is impressed with Mary's ideas She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and i a 20% increase in sales volume (20,000 to 24,00 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 compa?e it to the break-even point in units if Mary's ideas are used. ( Current break-even point New break even pont pairs of shoes pairs of shoes Compute the margen of safety ratio for current operations and after Mary's changes are introduced. (Round answers to 0 decimal places eg. ts%.) Current margin of safety ratio New margin of safety ratio Prepare a?VP income statement for current operations and after Mary's changes are introduced. BARGAIN SHOE STORE CVP Income StatementExplanation / Answer
Working 1 Calculation of Contribution per unit
Current
New
Sales Price
$ 60.00
$ 57.00
Variable Cost
$ 36.00
$ 36.00
Contribution
$ 24.00
$ 21.00
Breakeven Analysis
Current
New
Fixed cost
$ 387,600.00
$ 445,200.00
Contribution
$ 24.00
$ 21.00
Breakeven in Units
16150
21200
Current Breakeven Point
16150 Pairs of Shoes
New Breakeven Point
21200 Pairs of Shoes
Comparison Analysis
Change in Breakeven
5050
Pairs of Shoes
5050 more pair of shoes is required to be sold to achieve new breakeven.
Margin of Safety Calculation
Current
New
Sales
20000
24000
breakeven sales
16150
21200
Margin of Safety
3850
2800
Margin of safety in %
19%
12%
Current Margin of safety ratio
19%
New Margin of safety Ratio
12%
Bargain Shoe Store
CVP Income Statement
Current
New
Sales
$ 1,200,000.00
$ 1,368,000.00
Less: Variable Cost
$ 720,000.00
$ 864,000.00
Contribution Margin
$ 480,000.00
$ 504,000.00
Less :Fixed Cost
$ 387,600.00
$ 445,200.00
Net Income
$ 92,400.00
$ 58,800.00
The Change is not Suggested
Note: The change in price and increase in Fixed cost results in decrease on Net Income that is why it is not recommended.
Working 1 Calculation of Contribution per unit
Current
New
Sales Price
$ 60.00
$ 57.00
Variable Cost
$ 36.00
$ 36.00
Contribution
$ 24.00
$ 21.00
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