Exhibit 1 Hallstead Jewelers; Income Statements for Years Ended January 31 (thousands of dollars)

2003 2004 2006

Sales 8,583,000 8,102,000 10,711,000

Cost of goods sold 4,326,000 4,132,000 5,570,000
Gross margin 4,257,000 3,970,000 5141000
Expenses
Selling expense
Salaries 2,021,000 2,081,000 3,215,000
Commissions 429000 405000 536000
Advertising 254000 250000 257000
Administrative expenses 418000 425000 435000
Rent 420000 420000 840000
Depreciation 84000 84000 142000
Miscellaneous expenses 53000 93000 122000
Total expenses 3,679,000 3,758,000 5547000
Net income 578000 212000 -406000
 Segregating Fixed and Variable cost
2003 2004 2006

Sales 8,583,000 8,102,000 10,711,000

Less Variable Cost
Cost of goods sold 4,326,000 4,132,000 5,570,000
Commissions 429000 405000 536000
Total variable Cost 4,755,000 4,537,000 6,106,000
Contribution Margins 3,828,000 3,565,000 4,605,000
Less Fixed Costs

Salaries 2,021,000 2,081,000 3,215,000

Advertising 254000 250000 257000
Administrative expenses 418000 425000 435000
Rent 420000 420000 840000
Depreciation 84000 84000 142000
Miscellaneous expenses 53000 93000 122000
Total expenses 3,250,000 3,353,000 5,011,000
Net income 578000 212000 -406000
 Calculation of Break even points

2003 2004 2006

Sale Price(Average sales ticket) Refer Exhibit 2 1607

Total Variable Cost(refer previous Sheet) 4755000
Sales Ticket (refer Exhibit 2) 5341
Variable Cost Per unit(B5/B6) 890
Contribution Margin per unit(B4-B7) 717

Break even in Sales Ticket calculation

Total Fixed Cost 3250000
Contribution margin per unit 717
Break even in Sales Ticket 4533
Break Even in sales dollars 7284170
ak even points
 Margin of Safety Calculation
2003 2004
Budgeted sales 8583000
Break Even dollars 7284170
Margin of Safety 0.1513258767
Margin of Safety(Percentage) 15.1325876733
n of Safety Calculation
2006
 Possible effect of reducing price by 10 percent

Average sales price per unit (After

10 percent reduction)
Total Sales
Total Variable cost

Sales
Variable Cost
Contribution margin(Sales-Varibale
Cost)
Fixed cost
Net Income

Break Even in sales ticket

Fixed cost
Contribtuion margin per unit
Break Even in sales ticket
price by 10 percent
 Effect of eliminating Sales commission

Sales
Variable Cost
Contribution margin
Fixed cost
Net income
 Effect of $200000 of Additional Adve

Sales
Variable Cost
Contribution margin
Fixed cost
Net income

Break even in Units

000 of Additional Advertising