Compute the current break-even point in units

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Question - Scenario: Jessica Cox is the advertising manager for Specialty Shoes. 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 $24,000 in fixed costs to the $270,000 in fixed costs currently spent. In addition, Jessica is proposing a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Jessica's ideas but concerned about the effects these changes will have on the break-even point and the margin of safety.

Complete the following:

Compute the current break-even point in units, and compare it to the break-even point in units if Jessica's ideas are used.

Compute the margin of safety ratio for current operations and after Jessica's changes are introduced (Round to nearest full percent).

Make a CVP (Cost-Volume-Profit) income statement for current operations and after Jessica's changes are introduced.

Reference no: EM132542413

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