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Helen 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 $57,600 in fixed costs to the $387,600 currently spent. In addition, Helen 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 Helen's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. (a) Your answer is correct. Prepare a CVP income statement for current operations and after Helen's changes are introduced. BARGAIN SHOE STORE CVP Income Statement Current New 4 Sales 1200000 1368000 Variable Expenses 720000 3 864000 $ Contribution Margin V 480000 504000 Fixed Expenses 387600 445200 E Fixed Expenses Net Income/(Loss) $ Would you make the changes suggested? No eTextbook and Media Attempts: 2 of 3 used (b) Compute the current break-even point in sales units, and compare it to the break-even point in sales units if Helen's ideas are Implemented. (Round answers to 0 decimal places, e.g. 5,275.) Current break-even point pairs of shoes New break-even point pairs of shoes eTextbook and Media Question 7 of 7

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