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1. The break-even point in number of sales in 2003 was 7,012 units sold. In 2004 the break-even point was 7,727 units sold, and in 2006, the break-even point was 11,902 units sold. In respect to the break-even point in sales dollars, the break-even point for 2003 was $7,131,204. In 2004 this value was $7,456,555, and in 2006, the break-even point rose incrementally to $11,556,842. During 2003 and 2004, Hallstead resided in their previous location which held 10,230 square feet. Between these years, there is an increase in their break-even point, but this change can be associated with a down year in sales. Their sales decreased by approximately $481,000. Along with that, we can see that Hallstead’s fixed costs remained stable, only increasing by $103,000. The year to focus on is the change in Hallstead’s location when they moved to a new store with 5,050 more square feet. With this change, their fixed costs rose immensely, and they failed to account for a necessary change in advertising. Hallstead was running their business in the same manner they did during their years in the smaller store. The margin of safety in 2003 was 20.35%. In 2004, this decreased to 8.71%, and the margin of safety for 2006 was – 7.82%. This value for 2006 is insignificant because they lost money. The margin of safety quantifies the cushion in percent of sales the firm has before they reach the break-even point.

2. While this idea may seem appropriate to put Hallstead on track, it is in fact a poor decision as net income decrease even more. The net income in this case would a negative value at - $1,124,160. The break-even point would increase to 15,507 units sold, and the break-even point in sales dollars would increase to $13,551,567.30.

3. This idea would not only decrease the break-even point in units sold to 10,662 units but it would also create a positive net income for Hallstead…...

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