Johnson Men's Clothing revenues and cost data for 2020 are as follows: Revenues...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Johnson Men's Clothing revenues and cost data for 2020 are as follows:
Revenues $600,000.00
Cost of goods sold $300,000.00
Gross margin $300,000.00
Operating cost:
Salaries(Fixed) $170,000.00
Sales commission(10% of Sales) $ 60,000.00
Depreciation of equipment and fixtures $ 20,000.00
Store rent (54,500 per month) $ 54,000.00
Other operating Costs $ 45,000.00 $349,000.00
Operating income (loss) $(49,000.00)
Mr. Johnson, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 variable costs, which vary with sales volume, and $15,000 (fixed) costs.
a. Compute the contribution margin of Johnson Men's Clothing. Also compute the contribution margin percentage (Hint: Assume all Costs of Goods Sold are variable costs).
b. Mr. Johnson estimates that he can increase revenues by 55% by incurring additional advertising costs of $7,500. Calculate the impact of the additional advertising costs on operating income.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
