Jayzene Griffiths is the newly appointed manager for a fashionable shoe store. Her marketing ideas include the installation of a new lighting system and increased display space that will add $30,000 in fixed costs to the $18,000 currently being spent. In addition, Jayzene is proposing that a 10% decrease ($30.00 to $27.00) will produce a 30% increase in sales volume (5,000 to 6,500). Variable costs will remain at $15 per pair of shoes. Management is impressed with Jayzene’s ideas, but concerned about the effects these changes will have on the breakeven point and margin of safety. Required: Compute the current breakeven point in units and dollar value and compare it to the breakeven point (units and $) if Jayzene’s ideas are used. Prepare two (2) conventional breakeven charts (using excel spread sheets) for the current and proposed situations. The chart must indicate the BEP and margin of safety.
Jayzene Griffiths is the newly appointed manager for a fashionable shoe store. Her marketing ideas include the installation of a new lighting system and increased display space that will add $30,000 in fixed costs to the $18,000 currently being spent. In addition, Jayzene is proposing that a 10% decrease ($30.00 to $27.00) will produce a 30% increase in sales volume (5,000 to 6,500). Variable costs will remain at $15 per pair of shoes. Management is impressed with Jayzene’s ideas, but concerned about the effects these changes will have on the breakeven point and margin of safety. Required: Compute the current breakeven point in units and dollar value and compare it to the breakeven point (units and $) if Jayzene’s ideas are used. Prepare two (2) conventional breakeven charts (using excel spread sheets) for the current and proposed situations. The chart must indicate the BEP and margin of safety.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 10EB: Keleher Industries manufactures pet doors and sells them directly to the consumer via their web...
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Jayzene Griffiths is the newly appointed manager for a fashionable shoe store. Her marketing ideas include the installation of a new lighting system and increased display space that will add $30,000 in fixed costs to the $18,000 currently being spent. In addition, Jayzene is proposing that a 10% decrease ($30.00 to $27.00) will produce a 30% increase in sales volume (5,000 to 6,500). Variable costs will remain at $15 per pair of shoes. Management is impressed with Jayzene’s ideas, but concerned about the effects these changes will have on the breakeven point and margin of safety.
Required:
- Compute the current breakeven point in units and dollar value and compare it to the breakeven point (units and $) if Jayzene’s ideas are used.
- Prepare two (2) conventional breakeven charts (using excel spread sheets) for the current and proposed situations. The chart must indicate the BEP and margin of safety.
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