Nancy 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 $10,000 in fixed costs to the $144,000 currently spent. In addition, Nancy 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 shoes. Management is impressed with Nancy's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. (a) Prepare a CVP income statement for current operations and after Nancy's changes are introduced. BARGAIN SHOE STORE CVP Income Statement

Nancy 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 $10,000 in fixed costs to the $144,000 currently spent. In addition, Nancy 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 shoes. Management is impressed with Nancy's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. (a) Prepare a CVP income statement for current operations and after Nancy's changes are introduced. BARGAIN SHOE STORE CVP Income Statement

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 16PB: At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The...

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Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?
At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the problem. Using the extra worker, the company will be able to produce and sell 9,000 more units per year. The selling price per unit is $20. The cost per unit currently is $15.85 as shown: What is the annual financial impact of hiring the extra worker for the bottleneck process?
Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas City, and the other in Tulsa. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for 1,620. Sales volume averages 20,000 units per year in each plant. Recently, the Kansas City plant reduced the price of the tilt model to 1,440. Discussion with the Kansas City manager revealed that the price reduction was possible because the plant had reduced its manufacturing and selling costs by reducing what was called non-value-added costs. The Kansas City manufacturing and selling costs for the tilt model were 1,260 per unit. The Kansas City manager offered to loan the Tulsa plant his cost accounting manager to help it achieve similar results. The Tulsa plant manager readily agreed, knowing that his plant must keep pacenot only with the Kansas City plant but also with competitors. A local competitor had also reduced its price on a similar model, and Tulsas marketing manager had indicated that the price must be matched or sales would drop dramatically. In fact, the marketing manager suggested that if the price were dropped to 1,404 by the end of the year, the plant could expand its share of the market by 20 percent. The plant manager agreed but insisted that the current profit per unit must be maintained. He also wants to know if the plant can at least match the 1,260 per-unit cost of the Kansas City plant and if the plant can achieve the cost reduction using the approach of the Kansas City plant. The plant controller and the Kansas City cost accounting manager have assembled the following data for the most recent year. The actual cost of inputs, their value-added (ideal) quantity levels, and the actual quantity levels are provided (for production of 20,000 units). Assume there is no difference between actual prices of activity units and standard prices. Required: 1. Calculate the target cost for expanding the Tulsa plants market share by 20 percent, assuming that the per-unit profitability is maintained as requested by the plant manager. 2. Calculate the non-value-added cost per unit. Assuming that non-value-added costs can be reduced to zero, can the Tulsa plant match the Kansas City per-unit cost? Can the target cost for expanding market share be achieved? What actions would you take if you were the plant manager? 3. Describe the role that benchmarking played in the effort of the Tulsa plant to protect and improve its competitive position.
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 $19,000 in fixed costs to the $128,000 currently spent. In addition, Mary 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 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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Sandra 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 $39,000 in fixed costs to the $423,000 currently spent. In addition, Sandra 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 $36 per pair of shoes. Management is impressed with Sandra's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. (a) Prepare a CVP income statement for current operations and after Sandra's changes are introduced. BARGAIN SHOE STORE CVP Income Statement Current New 2$ $ $ Would you make the changes suggested?
Patricia Johnson is the advertising manager for Crane 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 $14,760 in fixed costs to the $177,120 currently spent. In addition, Patricia is proposing that a 10 % price decrease ($30 to $27) will produce a 20% increase in sales volume (16,400 to 19,680). Variable costs will remain at $12 per pair of shoes. Management is impressed with Patricia's ideas but are concerned about the effects that these changes will have on the break-even point and the margin of safety. Calculate the current break-even point in units, and compare it with the break-even point in units if Patricia's ideas are used. Current break-even point Break-even point if Patricia's ideas are used units units
Richie Chandra is the advertising manager for Skechers brand. 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 currently spent. In addition, Richie 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 Richie’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. Instructions a) Compute the current break-even point in units, and compare it to the break-even point in units if Richie’s ideas are used. b) Compute the margin of safety ratio for current operation and after Richie’s changes is introduced. c) Prepare a CVP income statement for current operations and after Richie’s changes are introduced. d) Would you make the changes…
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 margin of safety ratio for both situations. Prepare CVP income statements for both the current and proposed situations. Would you make changes suggested by Jayzene? Give reasons for your answer.
Cullumber 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 $57,600 in fixed costs to the $396,000 currently spent. In addition, Cullumber 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 Cullumber's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. (a) Compute the current break-even point in units, and compare it to the break-even point in units if Cullumber's ideas are used. Current break-even point New break-even point pairs of shoes pairs of shoes
Catherine is the advertising manager for Super Shoes limited. 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 Ksh 2,400,000 in fixed costs to the Ksh 27,000,000 in fixed costs currently spent. In addition, Catherine is proposing a 5% price decrease from the current Ksh 4,000 per pair and this is expected to produce a 30% increase in sales volume from the current 20,000 pairs. Variable costs will remain at Ksh 2,400 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects these changes will have on the break-even point and the margin of safety. Required Compute the current break-even point in units, and compare it to the break-even point in units if Catherine’s ideas are used Compute the margin of safety ratio for current operations and after Catherine’s changes are introduced Prepare a C-V-P analysis profit statement for…