Problem
Carol Garcia is the advertising manager for Sheridan Shoe Store. She is currently working on a major promotional campaign. Her ide include the installation of a new lighting system and increased display space that will add $20,520 in fixed costs to the $246,240 currently spent. In addition, Carol is proposing that a 10% price decrease ($27 to $24) will produce a 20% increase in sales volume (22,800 to 27,360). Variable costs will remain at $ 12 per pair of shoes. Management is impressed with Carol's ideas but are concerne 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 Carol's ideas are used.