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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Revenues Cost of goods sold (48% of sales) Gross margin Operating costs $800,000 384,000 416,000 Salaries fixed Sales commissions (12% of sales) Amortization of equipment and fixtures Store rent (S5,100 per month) Other operating costs $212,000 96,000 19,200 61,200 72,300 460,700 $ (44,700) Operating income (loss)