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$750,000 Question 8 Three years ago, Dana Mann and her brother-in-law Eric Boldt opened Skysong Company. For the first two years, business was good, but
$750,000 Question 8 Three years ago, Dana Mann and her brother-in-law Eric Boldt opened Skysong Company. For the first two years, business was good, but the following condensed Income results for 2013 were disappointing. Skysong Company Income Statement For the Year Ended December 31, 2018 Net sales Cost of goods sold 592,500 Gross profit 157,500 Operating expenses Selling expenses $110,000 Administrative expenses 22,000 132,000 Net Income $25,500 Dana believes the problem lies in the relatively low gross profit rate (gross profit divided by net sales) of 21%. Eric believes the problem is that operating expenses are too high. Dane thinks the gross profit rate can be improved by making both of the following changes. She does not anticipate that these changes will have any effect operating expenses. Increase average selling prices by 17%. This Increase is expected to lower sales volume so that total sales will increase only 6%. 2. Buy merchandise in larger quantities and take all purchase discounts. These changes to selling prices and purchasing practices are expected to increase the gross profit rate from 21% to 24%. 1. Eric thinks expenses can be cut by making both of the following changes. He feels that these changes will not have any effect on net sales. 1. Cut sales salaries (selling expense) of $60,000 in half and give sales personnel a commission of 2% of net sales. Reduce store deliverles to one day per week rather than twice a week. This change will reduce delivery expenses (selling expense) of $30,000 by 40%. Z Dana and Eric come to you for help in deciding the best way to improve net income. Answer the following Prepare a condensed income statement for 2019, assuming Dene's changes are implemented. (If there is a net loss then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Skysong Company Income Statement . II LINK TO TEXT Prepare a condensed income statement for 2019, assuming Eric's ideas are adopted. (If there is a net loss then enter the amo Skysong Company Income Statement $ $ LINK TO TEXT What is your recommendation to Dana and Eric? LINK TO TEXT Prepare a condensed income statement for 2019, assuming both sets of proposed changes are made. (If there is a net loss the Skysong Company Income Statement $ LINK TO TEXT
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