11.Data table

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Revenues		$500,000
Cost of goods sold (all variable costs)		250,000
Gross margin		250,000
Operating costs:
Salaries fixed	$120,000
Sales commissions (8% of sales)	40,000
Depreciation on equipment and fixtures	17,000
Store rent ($4,500 per month)	54,000
Other operating costs	50,000	281,000
Operating income (loss)		$(31,000)

Requirements

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1.	Compute the contribution margin of Schmidt Men's Clothing.
2.	Compute the contribution margin percentage.
3.	Mr. Schmidt estimates that he can increase units sold, and hence revenues by 25% by incurring additional advertising costs of $10,000. Calculate the impact of the additional advertising costs on operating income.
4.	What other actions can Mr. Schmidt take to improve operating income?

Schmidt Men's Clothing's revenues and cost data for 2017 are as follows:

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.

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requirements

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Part 1

Requirement 1. Compute the contribution margin of Schmidt Men's Clothing.

Determine the formula to calculate the contribution margin, then enter the amounts in the formula to compute the contribution margin of

Schmidt

Men's Clothing.

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Contribution margin