1.) Break-even ticket sales increased from 4533 in 2003, to 4998 in 2004 and 7491 in 2006. Break-even point in Sales Dollars has changed from $7,285 in 2003, to $7,617 in 2004 and $11,634 in 2006. (Table 1) The margin of safety has changed from $1,298 in 2003, to $485 in 2004, and a loss of $923 in 2006. (Table 2) There is a decrease from 2003 to 2006. Fixed cost per month attributed to stores relocation and subsequent renovations caused a decrease from 2003 to 2006. Other factors contributing to the 2003-2006 decrease are as follows: • 1% increase in Cost of Goods Sold (COGS) totaling $81,000 • Decrease in sales of $481,000 • Increase in salaries totaling $60,000 • Increase in miscellaneous expenses of $40,000. (Table 3) 2.) If prices were reduced by 10 percent, Hallstead’s total income would decrease to $1,111. This would change the break-even point for ticket sales to 9,637, and significantly change the overall sales figure to $13,473 (Table 4). 3.) Gretchen’s idea would effectively eliminate sales commissions. This would reduce sales volume by 1,143. This would decrease ticket sales to 8,494 and compromise the break-even. Sales dollars would reduce by $1,598 to $11,875 (Table 4). 4.) Michaela’s suggestion to increase advertising by $200,000 is sound: The increase accounts for 2% of sales and 4% of 2006 sales. Both figures are comparatively low for a retail business. This increase would change the break-even point from 7,491 to 7,790 ticket sales (Table 5). 5.) If fixed costs remained static from 2006 to 2007, average sales ticket would have to increase from $1,553 to $1,690 in order to break-even. (Table 6). List of recommendations for Hallstead Jewelers are as follows: Evaluate the number of sales staff needed and consider reducing the number of FTE’s and/or PTE’s. When reducing staff and/or operating, make sure that the best sales associates are receiving the number of hours they desire and then allocating the remaining…
