The management of Manchester’s Department Store is concerned about the operation of its sporting goods department, which has not been very successful. The following condensed income statement gives the latest year’s results:

Required

a. Calculate the gross profit percentage for the sporting goods department and for the other departments as a group.

b. It is estimated that if an additional \($10,500\) were spent on promotion of sporting goods, average prices can be raised 5% without affecting physical volume of goods sold. What effect would this have on the operating results of the sporting goods department? (Ignore the effect of income tax.)

c. Alternatively, it is estimated that physical volume of goods sold could be increased 8% if an additional \($15,000\) were spent on promotion of sporting goods and prices were not increased. Assuming that operating expenses remain the same, what effect would this have on the operating results of the sporting goods department? (Ignore the effect of income tax.)

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Sales.. Cost of goods sold Gross profit.. Direct expenses Indirect expenses Total expenses Net income. Sporting Goods Department $480,000 360,000 $120,000 $ 67,500 48,000 $115,500 $ 4,500 All Other Departments $2,400,000 1,560,000 $ 840,000 $ 336,000 240,000 $ 576,000 $ 264,000