Contribution margin, decision making. McCarthy Men’s Clothing’s revenues and cost da...

Contribution margin, decision making. McCarthy Men’s Clothing’s revenues and cost data for 2014 are as follows:

Mr. McCarthy, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $35,000 variable costs, which vary with sales volume, and $5,000 (fixed) costs. 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?