enoVO Mary Willis is the advertising manager for Bargain Shoe Store, She is curr

Question

enoVO Mary Willis is the advertising manager for Bargain Shoe Store, She is currently Management is impressed with Mary' working on a major promotional campaign. Her ideas include the c installation of a new lighting svstem and increased display space that will add $30.400 in n sales volume (20,000 to 24,000) Variable costs wil remain at $24 per pair of shoes a new s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety the orrent treak-even poit in usts, and compare " to the breakeven pont in unts Mary's ldeas" used. (mondanswertoOde I alplaan .gL Current break -even point hew break.ven pole pairs of shoes pairs of shoes Cempute the margin of safety ratio for current operations and after Mary's changes are introduced. (Round answers to 0 decimal ploces, e.g. 15 Current margin of safety ratio New margin of safety ratio PrepareCVp income statement for ourrent operations and after Harychanges are introduced. Click it you woold like to Show Work for this question: 9 haa

Explanation / Answer

1 Current break even point= 272000/(40-24)= 17000 New break even point=(272000+30400)/(38-24)= 21600 2 Current margin of safety ratio =(20000-17000)/20000= 15% New margin of safety ratio =(24000-21600)/24000= 10% 3 Current New Sales revenue 800000 912000 Variable costs 480000 576000 Contribution margin 320000 336000 Fixed costs 272000 302400 Net operating income 48000 33600 No, changes should not be done

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