Oriole Willis is the advertising manager for Bargain Shoe Store.She is currently working on...

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Accounting

Oriole Willis is the advertising manager for Bargain 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 $ 39,000 in fixed costs to the $423,000 currently spent. In addition, Oriole is proposing that a 5%price decrease ($ 60 to $ 57) will produce a 20% increase in salesvolume ( 20,000 to 24,000). Variable costs will remain at $ 36 perpair of shoes. Management is impressed with Oriole’s ideas butconcerned about the effects that these changes will have on thebreak-even point and the margin of safety.
Prepare a CVP income statement for current operations and afterOriole’s changes are introduced.
sales current new
variable expense
contribution margin
net income

Answer & Explanation Solved by verified expert

4.5 Ratings (971 Votes)

Given data:

New sales units =24,000

New selling price = $ 57

Variable cost = $ 36

Fixed cost 423,000+39,000 =462,000

Answer:

Sales current new = (24,000*$ 57) = $ 1,368,000

-Variable cost = (24,000*$ 36) = $ 864,000

= Contribution = (24,000* $21) = $ 504,000

-Fixed cost = = $ 462,000

= Net income = = $ 42,000

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Transcribed Image Text

In: AccountingOriole Willis is the advertising manager for Bargain Shoe Store.She is currently working on a...Oriole Willis is the advertising manager for Bargain 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 $ 39,000 in fixed costs to the $423,000 currently spent. In addition, Oriole is proposing that a 5%price decrease ($ 60 to $ 57) will produce a 20% increase in salesvolume ( 20,000 to 24,000). Variable costs will remain at $ 36 perpair of shoes. Management is impressed with Oriole’s ideas butconcerned about the effects that these changes will have on thebreak-even point and the margin of safety.Prepare a CVP income statement for current operations and afterOriole’s changes are introduced.sales current newvariable expensecontribution marginnet income