Teri Hall has recently opened Sheer Elegance, Inc., a store specializing in fashionable stockings. Ms. Hall has just completed a course in managerial accounting, and she believes that she can apply certain aspects of the course to her business. She is particularly interested in adopting the cost-volume-profit (CVP) approach to decision making. Thus, she has prepared the following analysis: Sales price per pair of stockings $2.00 Variable expense per pair of stockings 0.80 Contribution margin per pair of stockings $1.20 Fixed expenses per year Building rental $12,000 Equipment depreciation 3.000 Selling 30,000 Administrative 15,000 TTL FIXED: $60,000 1. How many pairs of stockings must be sold to break even? 2. How many pairs of stockings must be sold to earn a $9,000 target net income for the first year? Assume a tax rate of 40%. 3. Ms. Hall believes that a 10% reduction in the selling price combined with a $5,000 increase in advertising expense will increase sales by 25%. What is the impact on operating income if this happens? Assume the current sales level is 70.000 pair of stockings. Use the incremental approach 4. Refer to the original data. Actual sales for the first year were $125.000 a. What is the store's degree of operating leverage? b. Ms. Hall is confident that with some effort she can increase sales by 20% next year. What would be the expected percentage increase in net income? Use the operating leverage concept to compute your