Mr. Wharton, the owner of the store, is unhappy with theoperating results. an analysis of other operating costs revealsthat it includes $45,000 variable costs, which vary with salesvolume, and $20,000 (fixed) costs.
Revenues | | $450,000 |
Cost of goods sold (all variable costs) | | 202,500 |
Gross margin | | 247,500 |
Operating costs: | | |
Salaries fixed | $170,000 | |
Sales commissions (13% of sales) | 58,500 | |
Depreciation on equipment and fixtures | 11,000 | |
Store rent ($4,000 per month) | 48,000 | |
Other operating costs | 65,000 | 352,500 |
Operating income (loss) | | $(105,000) |
Requirement 1
Determine the formula to calculate the contribution margin, thenenter the amounts in the formula to compute the contribution marginof Wharton Mens Clothing
____ - ______ = Contribution Margin
Requirement 2
Compute the contribution margin percentage.
Requirement 3
Mr. Whartron estimates that he can increase units sold, andhence revenues by 25% by incurring additional advertising costs of$15,000. calculate the impact of the additional advertising costson operating income
Requirement 4
What other actions can Mr. Wharton take to improve operatingincome?
