Mary Willis is the advertising manager for Culver Shoe Store. She is currently working on a...

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Accounting

Mary Willis is the advertising manager for Culver Shoe Store.She is currently working on a major promotional campaign. Her ideasinclude the installation of a new lighting system and increaseddisplay space that will add $14,000 in fixed costs to the $133,000currently spent. In addition, Mary is proposing that a 5% pricedecrease ($20 to $19) will produce a 20% increase in sales volume(20,000 to 24,000). Variable costs will remain at $12 per pair ofshoes. Management is impressed with Mary’s ideas but concernedabout the effects that these changes will have on the break-evenpoint and the margin of safety.
A)
Current break-even point_ pairs of shoes
New break-even pointpairs of shoes
B)
Current Margin of safety ratio _%
New margin of safety ratio _____%
C)
Prepare a cup income statement for current operations and afterMary's changes are introduced.
Income statement :

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3.9 Ratings (410 Votes)

Formula to calculate Contribution margin per unit Selling price per unit Total variable cost per unit Current Contribution margin per unit 20 12 8 New Contribution margin per unit 19 12 7 A See Answer

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