Just the answer to Alternative #3! Please include equations used.

1. How has the breakeven point in number of sales tickets (number of customer orders written) and breakeven in sales dollars changed from 2003, to 2004, and to 2006? How has the margin of safety changed? What caused the changes?

Alternative #1: One idea that the consultant had was to reduce prices to bring in more customers. If average prices in 2006 were reduced by ten percent (10%), and the number of sales tickets (unit sales) increased to 7,500, would the companys net income be increased? With prices reduced, what would be the new breakeven point in sales volume and safety margin as a % of sales in 2006?

Alternative #2: Another idea that Gretchen had was to eliminate sales commissions. Hallsteads was the only jewelry store in the city that paid sales commissions, and although both Grandfather and Father had insisted that commissions were one of the reasons for their success, Gretchen had her doubts. If sales commissions were eliminated, what would be the companys net income? How would the elimination of sales commissions in 2006 affect the breakeven volume and safety margin as a % of sales in 2006? Alternative #3: Michaela felt that a bigger store could benefit from greater advertising and suggested that they increase advertising by $200,000. How would this affect the breakeven point? Would you recommend that the sisters try this?

Just the answer to Alternative #3! Please include equations used.

2003 2004 2006 Sales $8,583 $8,102 $10,711 4.326 41325.570 $4,257 $3,970 5,141 Gross margin Expenses Selling expense Salaries Commissions Advertising Administrative expenses 2,021 429 2,081 405 3,215 536 257 418 420 84 53 425 420 84 Depreciation Miscellaneous expenses Total expenses Net income 142 122 $3,679 $3,758 $5,547 $578 212 (406) Source: Casewriter Exhibit 2 Hallstead Jewelers Operating Statistics 2003 2004 2006 Sales space (square feet) Sales per square foot Sales tickets Average sales ticket 10,230 $ 839 792$ 701 5,316 $1,607 1,524$1,553 10,230 15,280 5,341 6,897