Question
Assume the firm hires Ms. Carr, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 15 percent of
Assume the firm hires Ms. Carr, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 15 percent of sales, sales can be increased to $1,600,900. The extra sales effort will also reduce cost of goods sold to 74 percent of sales. (There will be a larger markup in prices as a result of more aggressive selling.) Depreciation expense will remain at $13,000. However, more automobiles will have to be carried in inventory to satisfy customers, and interest expense will go up to $16,300. The firms tax rate will remain at 30 percent. Compute revised earnings after taxes based on Ms. Carrs suggestions for Lemon Auto Wholesalers. (Round taxes and earnings after taxes to 1 decimal place.)
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