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

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Accounting

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?

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