Analyze Operational Changes Richmond's is a retail store with eight departments, including a garden department that has been operating at a loss. The following condensed income statement gives the latest year's operating results: Garden Department All Other Departments Sales Cost of sales $336,000 $2,400,000 201,600 1,560,000 Gross profit 134,400 840,000 Direct expenses 108,000 273,000 Common expenses 48,000 312,000 Total expenses Net income (Loss) 156,000 $(21,600) 585,000 $255,000 a. Calculate the gross profit percentage for the garden department and for the other departments as a group. Garden department 40 % All other departments 35 b. Suppose that if the garden department were discontinued, the space occupied could be rented to an outside firm for $18,000 per year, and the common expenses of the firm would be reduced by $4,500. What effect would this action have on Richmond's net income? (Ignore income tax in your calculations.) Richmond's net income would decrease by $ 3,900 c. It is estimated that if an additional $6,000 were spent on advertising, prices in the garden center could be raised an average of 5% without a change in physical volume of products sold. What effect would this have on the operating results of the garden department? (Again, ignore income tax in your calculations.) Use a negative sign to indicate a net loss answer; otherwise do not use negative signs with your answers. Garden Department Income Statement Sales Cost of sales Gross profit Direct expenses $ Common expenses Total expenses Net income (Loss) $ 352,800 201,600 151,200 10,800 x 48,000 162,000 (10,800) G