How much would the average sales ticket have to increase to breakeven if the fixed cost remained the same in 2007 as it was in 2006?
What do you recommend the managers at Hallstead Jewelers do?
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Exhibit 1 Hallstead Jewelers; Income Statements for Years Ended January 31 (thousands of dollars)
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2003
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2004
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2006
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|
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Sales
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$8,583
|
$8,102
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$10,711
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Cost of goods sold
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4,326
|
4,132
|
5,570
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Gross margin
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$4,257
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$3,970
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$5,141
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Expenses
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Selling expense
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|
|
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Salaries
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2,021
|
2,081
|
3,215
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Commissions
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429
|
405
|
536
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Advertising
|
254
|
250
|
257
|
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Administrative expenses
|
418
|
425
|
435
|
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Rent
|
420
|
420
|
840
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Depreciation
|
84
|
84
|
142
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Miscellaneous expenses
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53
|
93
|
122
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Total expenses
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$3,679
|
$3,758
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$5,547
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Net income
|
$578
|
$212
|
($406)
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Exhibit 2 Hallstead Jewelers Operating Statistics
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2003
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2004
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2006
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Sales space (square feet)
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10,230
|
10,230
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15,280
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Sales per square foot
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$839
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$792
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$701
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Sales tickets
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5,341
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5,316
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6,897
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Average sales ticket
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$1,607
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$1,524
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$1,553
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