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.
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.