Analyze Operational Changes 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:

		Sporting Goods Department
				All Other Departments
Sales					$360,000		$1,800,000
Cost ofgoods sold		270,000		1,170,000
Gross profit		90,000		630,000
Direct expenses		50,600		252,000
Indirectexpenses		36,000		180,000
Total expenses		86,600		432,000
Net income (Loss)		$3,400		$198,000

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

Sporting goods department Answer%

All other departments Answer%

b. It is estimated that if an additional $7,800 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.)

Use a negative sign to indicate a net loss answer; otherwise do not use negative signs with your answers.

Sporting Goods Department Income Statement
Sales
Cost of goods sold
Gross profit
Direct expenses
Indirectexpenses
Total expenses
Net income (Loss)

c. Alternatively, it is estimated that physical volume of goods sold could be increased 8% if an additional $11,300 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.)

Use a negative sign to indicate a net loss answer; otherwise do not use negative signs with your answers.

Sporting Goods Department Income Statement
Sales
Cost of goods sold
Gross profit
Direct expenses
Indirectexpenses
Total expenses
Net income (Loss)