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 $24,210 in fixed costs to the $276,110 currently spent. In addition, Mary is proposing that a 5% price decrease ($41 to $39) will produce a 19% increase in sales volume (22,730 to 27,049). Variable costs will remain at $25 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.
1.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.)
2.Compute the margin of safety ratio for current operations and after Mary's changes are introduced. (Round answers to 0 decimal places, e.g. 15%.)
3.Prepare a CVP income statement for current operations and after Mary's changes are introduced.