Oriole 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 $ 39,000 in fixed costs to the $ 423,000 currently spent. In addition, Orioleis proposing that a 5% price decrease ($ 60 to $ 57) will produce a 20% increase in sales volume ( 20,000 to 24,000). Variable costs will remain at $ 36 per pair of shoes. Management is impressed with Oriole’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
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