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 $12,800 in fixed costs to the $137,000 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. 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 Compute the margin of safety ratio for current operations and after Mary’s changes are introduced. (Round answers to 0 decimal places, e.g. 15%.) Current margin of safety ratio % New margin of safety ratio % Prepare a CVP income statement for current op Document Preview:
Print by: Gregg WolfeAC202:AC202DLAF1A2018 Principles of Managerial Account in / AC202 – Chapter 18 Assignment*Exercise 18-14 (Part Level Submission)Naylor Company had $154,200 of net income in 2016 when the selling price per unit was $155, the variable costs per unit were $95, and the fixed costs were $572,900. Management expects per unit data and total fixed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $61,200 in 2017.*(a)Your answer is correct. Compute the number of units sold in 2016. (Round answer to 0 decimal places, e.g. 1,225.) units12118 Attempts: 1 of 3 used *(b)Your answer is correct. Compute the number of units that would have to be sold in 2017 to reach the stockholders’ desired profit level. units13138 Attempts: 1 of 3 used *(c)Assume that Naylor Company sells the same number of units in 2017 as it did in 2016. What would the selling price have to be in order to reach the stockholders’ desired profit level? (Round answer to 2 decimal places, e.g. 12.25.)New selling price$Attempts: 0 of 3 used Copyright © 2000-2018 by John Wiley & Sons, Inc. or related companies. All rights reserved.