McCarthy Mens Clothings revenues and cost data for 2014 are as follows: Mr. McCarthy, the owner of
Question:
McCarthy Men’s Clothing’s revenues and cost data for 2014 are as follows:
Mr. McCarthy, the owner of the store, is unhappy with the operating results. An analysis of other operat-ing costs reveals that it includes $ 35,000 variable costs, which vary with sales volume, and $ 5,000 (fixed) costs.
Required
1. Compute the contribution margin of McCarthy Men’s Clothing.
2. Compute the contribution margin percentage.
3. Mr. McCarthy estimates that he can increase units sold, and hence revenues by 20% by incurring Âadditional advertising costs of $ 12,000. Calculate the impact of the additional advertising costs onÂoperating income.
4. What other actions can Mr. McCarthy 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...
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0133428704
15th edition
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan