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

Data Table

Revenues $450,000

Cost of goods sold (all variable costs) 225,000

Gross margin 225,000

Operating costs: $180,000

Salaries fixed

Sales commissions (11% of sales) 49,500

Depreciation on equipment and fixtures 20,000

Store rent ($4,000 per month) 48,000

Other operating costs 60,000 357,500

Operating income (loss) $(132,500)

Mr. McCarthy, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $45,000 variable costs, which vary with sales volume, and

$15,000 (fixed) costs.

Requirements:

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 15% by incurring additional advertising costs of $11,000. Calculate the impact of the additional advertising costs on operating income.
4.	What other actions can Mr. McCarthy take to improve operating income?