htmcoursel 149958968&OpenVellumHMAC 2e1903b083ac3315b8e7dSc70e6b39910016 DIANA &

Question

htmcoursel 149958968&OpenVellumHMAC 2e1903b083ac3315b8e7dSc70e6b39910016 DIANA & Cost Acct ACC 439 2831 pm DIANA HOLGL Cost Acct ACC 439 2B81 pm Homework: C 3 Score: 0 of 1 pt E3-35 (similar to) HW Score: 34 33%, 13 2 of 4 (3 complete) Question H Reily Men's Cloting's revenues and cost data for 2017 are as follows EEB OCick the con to vew the data) ORea, the owner of the ser" isunhappyse he opetahngresuts Anandyss ofater qerating costs reveals that it includes 0000 varutle costs. which vry with sies volum 15,000 (ed) cots Read the teauremet Determine the formula to caulate he contribution margn, then enter the amounts in the formula to comute t Data Table Requirements Cost of goods sold (all varable costs) Gros marg Operating cost 400 000 200 000 200 000 1 Compute the contribution margin of O'Reilly Men's Clothing 2 Compute the contrbution margin pencente M ORely estmates that he can incease unts sold and hance revenues by ddtional advertsing costs of $0 000 Calculate the impact 190 000 of he addisonal advering costs on operating income Whar other actons can Mr 'Reilly take to mprove operating income? Sales comm ssions( 13% of sales) Deprecation on equpment and ixtures Store rent (54 000 per mont 2 000 19000 8 000 5 000344 00 Pyint Done

Explanation / Answer

Solution(1)

Revenue - variable cost = contribution margin

$400,000 - $272,000 = $128,000

Solution (2)

Contribution margin percentage

= contribution margin/ revenue x100

= $128,000 / $400,000 x100

= 32%

Solution (3)

Current operating income % = (144,000)/400,000 x100

= -36%

New operating income% = (152,000)/460,000 x100

= -33%

Hence, operating income will increase by 3% due to advertise cost.

Solution (4) following actions can be taken by O'Relly to improve operating income;

1.) Reduce labour

2.) Minimize rent

3.) Increase output

4.) Decrease sales commission percentage

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