Reference no: EM133005842
Question - Wharton ?Men's Clothing's revenues and cost data for 2020 are as? follows:
Mr. Wharton?, the owner of the? store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $20,000 variable? costs, which vary with sales? volume, 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)
Required -
1. Compute the contribution margin of Wharton ?Men's Clothing.
2. Compute the contribution margin percentage.
3. Mr. Wharton estimates that he can increase units? sold, 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 operating? income?
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