Wharton Mens Clothings revenues and cost data for 2012 are as follows: Mr. Wharton, the owner of
Question:
Wharton Men’s Clothing’s revenues and cost data for 2012 are as follows:
Mr. Wharton, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $ 25,000 variable costs, which vary with sales volume, and $ 10,000 fixed costs.
1. Compute the contribution margin of Wharton Men’s Clothing.
2. Compute the contribution margin percentage.
3. Mr. Wharton estimates that he can increase revenues by 25% by incurring additional advertising costs of $ 15,000. Calculate the impact of the additional advertising costs on operating income.
4. What other actions can Mr. Wharton take to improve operatingincome?
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Managerial Accounting Decision Making and Motivating Performance
ISBN: 978-0137024872
1st edition
Authors: Srikant M. Datar, Madhav V. Rajan