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a. The Company had sales of $900,001) in 2014 and their cost of goods sold represented 65 percent of sales. Selling and administrative expenses were
a. The Company had sales of $900,001) in 2014 and their cost of goods sold represented 65 percent of sales. Selling and administrative expenses were 9 percent of sales. Depreciation expense was $10,000 and interest expense for the year was $8,000. The firm's tax rate is 30 percent. Calculate carnings after tax b. Assume The Company hires Ms. Ilood, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 12 percent of sales, sales can be incrcased to $1,000,110. The extra sales effort will also reduce cost of goods sold to 60 percent of sales (there will be a larger markup in prices as a result of more aggressive selling). Depreciation expenso will remain at $10,000. However, more automobiles will have to be carried in inventory to satisfy customers and interest expense will go up to $15.000. The firm's tax rate will remain at 30 percent. Calculate revised carnings after taxes based on Ms. Ilood's suggestions for The Company. Will her ideas increase or decrease profitability
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