Question 3 Three years ago, Karen Suez and her brother-in-law Reece Janes apened Gigasales Department Store. For the first 2 years, business was good, but the fallowing condensed income statement results for 2017 were disappainting. GIGASALES DEPARTMENT STORE For the Year Ended December 31, 2017 Net sales Cost of goods sold Gross proft Operating expenses $840,000 672,000 168,000 $120,000 Selling expenses Administrative expenses 24,000 144,000 Net income $24,000 Karen believes the problem lies in the relatively low gross profit rate of 20%. Reece believes the p oblem is that operating expenses are too h gh. Karen thinks the gross profit ate can be improved by making two changes 1 Increase average selling p ces by 15%; this increase is expected o ower sales volume so nat total sales dollars w l increase only 4% 2) Buy mer andse in larger quantities and take all purchase discounts. These changes to purchasing practices are expected to increase the gross profit rate rom ts current rate 20% to a new rate af 25%. Karen does not anticipate that these changes will have any effect on operating expenses. Reece thinks expenses can be cut by making these two changes 1 cut 2018 sales salaries or $72,000 in half and give sales personnel a commission of 2% of net sales. delivery expenses of $48,000 by 40%. Reece feels that these changes will not have any erfect on net sales. 2 Reduce store de e es to one day per week ather than twice a week; this change ill educe 2018 Karen and Reece come to you for help in deciding the best way to improve net income. Answer the following Prepare a condensed income statement for 2018 assuming Karen's changes are implemented. GIGASALES DEPARTMENT STORE Projected Income Statement Prepare a condensed income statement for 2018 assuming Reece's ideas are adopted. GIGASALES DEPARTMENT STORE Projected Income Statement Prepare a condensed income statement for 2018 assuming both sets of proposed changes are made. GGASALES DEPARTMENT STORE Projected Income Statement Click if you would like to Show Work for this question: Open Show Work