E mybusinesscourse.com MA'MBCProblemsCh 7&5 ii'H ,nl'lm inn ' iiiriiiililiiri'v 3' Return to c ' (1} Support' :: My Subscriptions 0 Quinn Thornton Analyze Operational Changes Richmond's is a retail store with eight departments, including a garden department that has been operating at a loss. The following condensed income statement gives the latest year's operating results: Garden Department All Other Depart ts Sales $840,000 $6,000,000 : Cost of sales 504,000 3,900,000 1 Gross prot 336,000 2,100,000 Direct expenses 270,000 682,500 ' Common expenses 120,000 780,000 , Total expenses 390,000 1,462,500 Net income (Loss) $64,000) $637,500 a. Calculate the gross profit percentage for the garden department and for the other departments as a group. Garden department 0 % All other departments 0 % b. Suppose that ifthe garden department were discontinued, the space occupied could be rented to an outside firm for $45,000 per year, and the common expenses ofthe firm would be reduced by $1 1,200. What effect would this action have on Richmond's net income? (Ignore income tax in your calculations.) Richmond's net income would v by $ 0 c It is estimated that if an additional $15,000 were spent on advertising, prices in the garden center could be raised an average of 5% without a change in physical volume of products sold. What effect would this have on the operating results of the garden department? (Again, ignore income tax in your calculations) Use a negative sign to indicate a net loss answer; otherwise do not use negative signs with your answers. Garden Department Income Statement Sales $ Cost of sales Gross prot Direct expenses Common expenses Total expenses ooooooo Net income (Loss) $