Mary Willis is the advertising manager for Ayayai 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 $22,000 in fixed costs to the $286,000 currently spent. In addition, Mary 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 Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
Answer
--Requirement [c]
CVP Income Statement | ||
Current | New | |
Sales revenue | $800,000 | $912,000 |
Variable cost | $480,000 | $576,000 |
Contribution margin | $320,000 | $336,000 |
Fixed Cost | $286,000 | $308,000 |
Net Income (or Income from Operations) | $34,000 | $28,000 |
>Workings
CVP Income Statement | ||
Current | New | |
Sales revenue | =20000*40 | =24000*38 |
Variable cost | =20000*24 | =24000*24 |
Contribution margin | =800000-480000 | =912000-576000 |
Fixed Cost | 286000 | =286000+22000 |
Net Income | =320000-286000 | =336000-308000 |
Mary Willis is the advertising manager for Ayayai Shoe Store. She is currently working on a...
Mary Willis is the advertising manager for Ayayai 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 $22,000 in fixed costs to the $286,000 currently spent. In addition, Mary 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...
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Mary Willis is the advertising manager for Ayayal 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 $22,000 in fixed costs to the $285,000 currently spent. In addition, Mary 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. Managemen...
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Scenario 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 $24,000 in fixed costs to the $270,000 in fixed cost currently spent. iIn addition Mary 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...
Question 1 Pharoah 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 $14,000 in fixed costs to the $133,000 currently spent. In addition, Pharoah is proposing that a 5% price decrease ($20 to $19) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $12 per pair of...
Problem 11-4 Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign, Her ideas include the instailation of a new ighting system and increased display space that wil add $24,000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000) Variable cests wil remain at $24 per pair of...
CALCULATOR PRINTER VERSION BACK Problem 18-4A 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 ighting system and increased display space that will add $49,200 in fixed costs to the $396,000 currently spent. In addition, Mary is proposing that a 5% price decrease (560 to $57) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at...