Schmidt Men's Clothing's revenues and cost data for 2006 are:

Mr. Schmidt, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $40,000 variable costs, which vary with sales volume, and $10,000 (fixed) costs.
Required
1. Compute the contribution margin of Schmidt Men's Clothing.
2. Compute the contribution margin percentage.
3. Mr. Schmidt estimates that he can increase revenues by 20% by incurring additional advertising costs of $10,000. Calculate the impact of the additional advertising costs on operating income.

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Revenues Cost of goods sold (40% of sales) Gross margin Operating costs: $500,000 200,000 300,000 Salaries fixed Sales commissions (10% of sales) Depreciation of equipment and fixtures Store rent ($4,000 per month) Other operating costs $150,000 50,000 12,000 8,000 50,000 310,000 S 10,000) Operating income (loss)