What is the COGS in this problem for the company's current operations and advertising operations?
The advertising manager for Bertolon Inc, a manufacturer of women's' shoes, 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 $25,000 in fixed costs to the $300,000 currently spent by the company. In an
effort to increase sales volume the advertising manager is also proposing a 7.5% price decrease from the
current selling price of $50 per pair of shoes. The company is currently selling 25,000 pairs of shoes and
expects that these changes would bring a 10% increase in the number of shoes sold. The current
variable costs for a pair of shoes are $30 and management expects this figure to remain unchanged.
Management is impressed with the advertising manager's initiative and ideas but is concerned about
the effects these changes will have on company profits, break-even point and margin of safety.
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