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In: Accounting

Mr. Wharton, the owner of the store, is unhappy with the operating results. an analysis of...

Mr. Wharton, the owner of the store, is unhappy with the operating results. an analysis of other operating costs reveals that it includes $45,000 variable costs, which vary with sales volume, 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, then enter the amounts in the formula to compute the contribution margin of Wharton Mens Clothing

____ - ______ = Contribution Margin

Requirement 2

Compute the contribution margin percentage.

Requirement 3

Mr. Whartron estimates that he can increase units sold, and hence revenues by 25% by incurring additional advertising costs of $15,000. calculate the impact of the additional advertising costs on operating income

Requirement 4

What other actions can Mr. Wharton take to improve operating income?

Solutions

Expert Solution

ekkarill92 answered 7 months ago
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