Question 2. Contribution margin, decision making. McCarthy Men's Clothing's revenues and cost data for 2014 are as follows: $500,000 250,000 250,000 Revenues Cost of goods sold Gross margin Operating costs: Salaries fixed Sales commissions (11% of sales) Depreciation of equipment and fixtures Store rent ($4,000 per month) Other operating costs Operating income (loss) $160,000 55,000 15,000 48,000 40,000 |_ 318,000 $(68,000) 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 additional advertising costs of $12,000. Calculate the impact of the additional advertising costs on operating income. 4. What other actions can Mr. McCarthy take to improve operating income