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 Cost ofgoods sold Gross profit Direct expenses Indirectexpenses Total expenses Net income (Loss) $720,000 $3,600,000 540,000 2,340,000 180,000 1,260,000 101,200 504,000 72,000 360,000 173,200 $6,800 864,000 $396,000 a. Calculate the gross profit percentage for the sporting goods department and for the other departments as a group. Sporting goods department 25 % All other departments 35 % b. It is estimated that if an additional $15,700 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 $22,500 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) $