Sunland Willis is the advertising manager for Bargain Shoe Store. She is currently working on...
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Sunland 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 $36,000 in fixed costs to the $272,000 currently spent. In addition, Sunland is proposing that 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 Sunland's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safetv. Prepare a CVP income statement for current operations and after Sunland's changes are introduced. BARGAIN SHOE STORE CVP Income Statement Current New Sales 400000 456000 Variable Expenses 240000 288000 Contribution Margin 160000 168000 Fixed Expenses 136000 152600 XX Net Income/(Loss) 24000 15400 Would you make the changes suggested? No
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