CASE STUDY 5 Al Hassan Company is a logistics company based in Muscat. The company's CEO, Mr.X is fearful that the company sales in the past five years had fallen due to the entry of new competitors from the international market. It has been in operations for the past 12 years and has initially dominated the logistics industry. Moreover, the company's regular customers have started to shift to the competitor for their logistics needs. The cost of repairs and maintenance registered at an average of 3% of the total cost of operations. Moreover, the labor cost has increased in the past 5 years and has contributed to the increasing cost of services. At the end 2019, the management is planning to introduce new measures to reduce its costs and improve on their profitability. One of the suggested steps by the company's controller is to lay -off one-third of its regular workers and rather hire contractual workers because this will save them on employee benefits and allowances. Mr. X recently hired a new finance manager Mr. Y because the old manager has resigned and was recruited by a competing company. Al Hassan Company's common size statement shows the following percentages: 31.12.2018 31.12.2019 Net Sales 100% 100% Gross Profit 65% 48% Operating Expenses 18% 25% Sales returns and allowances in 2018 was OMR 2,100 and it decreased by OMR 400 in 2019. Gross sales in 2018 was OMR 130,000 and it decreased to OMR 124,000 in 2019. Required: Q1.How much is the operating profit in 2018 and 2019? (4 marks) Q2. Comment on the profitability of Al Hassan Company in the past two years. Justify your answer by using at least two profitability ratios. (3 marks) Q3. Make a recommendation on specific steps that Al Hassan Company should take to improve its profitability