Data for Club Canada Wholesale Inc. are presented in P5-6A.

Instructions
(a) Calculate the profit margin and gross profit margin.
(b) The vice-president of marketing and director of human resources have proposed that the company change its compensation of the sales force to a commission basis rather than paying a fixed salary. Given the extra incentive, they expect net sales to increase by 15%. They estimate that gross profit will increase by $27,000, operating expenses by $13,500, and income tax expense by $2,700. Non-operating expense is not expected to change. Calculate the expected new gross profit and net income amounts.
(c) Calculate the revised gross profit margin and profit margin, using the information you calculated in part (b). Comment on the effect that this plan would have on profitability and evaluate the merit of this proposal.

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CLUB CANADA WHOLESALE INC Adjusted Trial Balance December 31, 2018 Debit Credit Cash Accounts receivable Prepaid insurance Inventory Supplies Land Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation-equipmen Accounts payable Unearned revenue Income tax payable Bank loan payable Common shares Retained earnings Sales $ 12,275 19,700 2,400 104,600 6,430 128,500 219,000 $ 93,060 95,500 33,400 60,900 9,650 3.500 98,200 50,00o 142,325 1,099,2o0 Sales returns and allowances Sales discounts Cost of goods sold Administrative expenses Selling expenses Interest expense Interest revenue Income tax expense 23,560 14,265 806,240 88,515 42,100 12,350 2,400 17,200 $1,592,635 $1,592,635