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Mary 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 $27,210 in fixed costs to the $284,070 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 18% increase in sales volume (21,100 to 24,898). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
(a) Compute the current break-even point in units, and compare it to the break-even point in units if Mary's ideas are used. (Round answers to 0 decimal places, e.g. 1,225.)
To the nearest whole cent, what should be the average property tax per unit at a sales volume of 41300 units? (Assume that this sales volume is within the relevant range.)
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