Brandon Harris has a small bakery business called Super Bakery. Revenues and cost data of Super Bakery for the year 2016 are as follows:

An analysis of other operating costs reveals that 80% of it varies with sales volume, and remaining 20% does not vary with sales volume rather remains same irrespective of sales volume.
1. Compute the contribution margin of Super Bakery.
2. Compute the contribution margin percentage.
3. Mr. Harris estimates that if he can spend an additional $15,000 toward sales promotion, sales revenues may increase by 30%. What should Mr. Harris’ decision be?
4. What other actions can he take to improve the operating income?

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Sales revenues $475,000 Cost of goods sold (40% of sales revenues) 190,000 Gross margin 285,000 Operating costs: Salaries fixed $175,000 Sales commissions (15% of sales) 71,250 Depreciation of equipment and fixtures 22,000 Insurance for the year 5,000 Store rent ($5,000 per month) 60,000 Other operating costs 50,000 383,250 Operating income (loss) $(98,250)