Decision-Making Across the Organiza Family Department Store Income Statement For the Year Ended December 31, 2019 700,000 553.000 147.000 Share. For the first two years, business was good, but the following condensed income resas CTS Three years ago. Debbie Sells and her brother-in-law Mike Mooney opened Family Debbie believes the problem lies in the relatively low gross profit rate (gross profit divided by me Debbie thinks the gross profit rate can be improved by making both of the following changes. She 1. Increase average selling prices by 20%. This increase is expected to lower sales volume so that 2. Buy merchandise in larger quantities and take all purchase discounts. These changes to selling and were disappointing Net sales Cost of goods sold Gross profit Operating expenses 100.000 Selling expenses 20,000 Administrative expenses Net income of 21%. Mike believes the problem is that operating expenses are too high. does not anticipate that these changes will have any effect on operating expenses. sales will increase only 5%. 120.000 27,000 purchasing practices are expected to increase the gross profit rate from 21% to 24%. Mike thinks expenses can be cut by making both of the following changes. He feels that these changes will not have any effect on net sales. Debbie and Mike come to you for help in deciding the best way to improve net income. Expa . Cut 2020 sales salaries (selling expenses) of 60,000 in half and give sales personnel a commission 2. Reduce store deliveries to one day per week rather than twice a week; this change will reduce 2020 delivery expenses (selling expenses) of 30,000 by 40%. of 2% of net sales