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Revenues Cost of goods sold (all variable costs) $600,000 300,000 Gross margin 300,000 Operating costs: Salaries fixed $140,000 Sales commissions (12% of sales) 72,000

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Revenues Cost of goods sold (all variable costs) $600,000 300,000 Gross margin 300,000 Operating costs: Salaries fixed $140,000 Sales commissions (12% of sales) 72,000 Depreciation of equipment and fixtures 10,000 Store rent ($3,500 per month) 42,000 Other operating costs 45,000 309,000 Operating income (loss) $ (9,000) Mr. Welch, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 variable costs, which vary with sales volume, and $15,000 (fixed) costs.

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