Saunders Electronics had the following results for the year just
Saunders’ Electronics had the following results for the year just ended:
Mr. Saunders, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $32,000 variable costs, for which the cost driver is sales volume, and $40,300 fixed costs.
REQUIRED
1. Compute the contribution margin of Saunders’ Electronics.
2. Compute the contribution margin percentage for the company.
3. Mr. Saunders estimates he can increase revenues by 25% by incurring additional advertising costs of $24,300. Calculate the impact on operating income of this action.
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