The Case Study focuses on CVP (Cost-Volume-Profit), break-even, and margin of safety analyses which allows students to experience working through a business scenario and applying these tools in managerial decision making.
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 costs currently spent. In 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 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.
Complete the following:
Prepare a maximum 700-word informal memo to management addressing Mary’s suggested changes.
Show your work in Microsoft Word or Excel.
Complete calculations/computations using Microsoft Word or Excel.
Submit your assignment.
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