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Wharton Men's Clothing's revenues and cost data for 2020 are asfollows: LOADING... (Click the icon...

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Accounting

Wharton Men's Clothing's revenues and cost data for 2020 are asfollows:

LOADING...

(Click the icon to view thedata.)

Mr. Wharton, the owner of thestore, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $20,000 variablecosts, which vary with salesvolume, and $5,000 (fixed) costs.

Revenues $400,000

Cost of goods sold (all variable costs) 200,000

Gross margin 200,000

Operating costs:

Salaries fixed $160,000

Sales commissions (13% of sales) 52,000

Depreciation on equipment and fixtures 16,000

Store rent ($4,000 per month) 48,000

Other operating cost 25,000 301,000

Operating income (loss) $(101,000)

  1. Compute the contribution margin of Wharton Men's Clothing.

2.Compute the contribution margin percentage.

3.Mr. Wharton estimates that he can increase unitssold, and hence revenues by 15% by incurring additional advertising costs of $13,000. Calculate the impact of the additional advertising costs on operating income.

4.What other actions can Mr. Wharton take to improve operatingincome?

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