Mary Willis is the advertising manager for Bargain Shoe Store. She is currently
ID: 2503337 • Letter: M
Question
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 $40,500 in fixed costs to the $270,000 currently spent. In addition, Julie 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 Julie
Explanation / Answer
Current: 270000 + 20X = 40X New: (40500+270000) + 20X = 38X Solve for X, apparently the new breakeven point will be higher