QUESTION:

(c1)

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The vice president of marketing and the director of human resources have developed a proposal whereby the company would compensate the sales force on a strictly commission basis. Given the increased incentive, they expect net sales to increase by 15%. As a result, they estimate that gross profit will increase by $110,949 and expenses by $151,511. Compute the expected new net income. (Hint: You do not need to prepare an income statement.) Then, compute the revised profit margin and gross profit rate. Comment on the effect that this plan would have on net income and on the ratios, and evaluate the merit of this proposal. (Ignore income tax effects.)

Revised net income		$enter revised net income in dollars
Revised profit margin (Round to 1 decimal place, e.g. 15.2%)		enter Revised profit margin in percentages rounded to 1 decimal place	%
Revised gross profit rate (Round to 1 decimal place, e.g. 15.2%)		enter Revised gross profit rate in percentages rounded to 1 decimal place	%