contribution margin decision making lurvey men s clothing s rev 268699

Contribution margin, decision making Lurvey Men’s Clothing’s revenues and cost data for 2011 are as follows:



Mr. Lurvey, 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.

Required:

1. Compute the contribution margin of Lurvey Men’s Clothing.

2. Compute the contribution margin percentage.

3. Mr. Lurvey estimates that he can increase revenues by 15% by incurring additional advertising costs of $13,000. Calculate the impact of the additional advertising costs on operatingincome.