Resources:Generally Accepted Accounting Principles (GAAP) U.S. Securities and Exchange Commission (SEC)
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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 $24000 in fixed costs to the $270000 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 (20000 to 24000). 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.
Preparea maximum 700-word informal memo to management addressing Mary’s suggested changes.
Showyour work in MicrosoftWord or Excel.
Completecalculations/computations using MicrosoftWord or Excel.
Formatyour assignment consistent with APA guidelines.
Computed the current break-even point in units and compared it to the break-even point in units if Marys ideas were used.
Computed the margin of safety ratio for current operations and after Marys changes were introduced (rounded to nearest full percent).
Prepared a CVP (Cost-Volume-Profit) income statement for current operations and after Marys changes were introduced.
Explained whether Marys changes should be adopted. Why or why not? Analyzed the information (first three rows above) and used the information to support students suggestion.
Showed work in Microsoft Word or
using MicrosoftWord or Excel.
The informal memo is a maximum 700words in length.
The paperincluding tables and graphs headings title page and reference pageis consistent with APA formatting guidelines and meets course-level requirements.
Intellectual property is recognized with in-text citations and a reference page.
Paragraph and sentence transitions are present logical and maintain the flow throughout the paper.
Sentences are complete clear and concise.
Rules of grammar and usage are followed including spelling and punctuation.