Mary Willis is the advertising manager for Concord 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 $34,200 in fixed costs to the $411,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($60 to $57) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $36 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.
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(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.)
Current break-even point
pairs of shoes
New break-even point
pairs of shoes
Answers: 1
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Mary Willis is the advertising manager for Concord Shoe Store. She is currently working on a major p...
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