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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

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 Departments
Sales $504,000 $3,600,000
Cost of sales 302,400 2,340,000
Gross profit 201,600 1,260,000
Direct expenses 162,000 409,500
Common expenses 72,000 468,000
Total expenses 234,000 877,500
Net income (Loss) $(32,400) $382,500

a. Calculate the gross profit percentage for the garden department and for the other departments as a group.

Garden department Answer%

All other departments Answer%

b. Suppose that if the garden department were discontinued, the space occupied could be rented to an outside firm for $27,000 per year, and the common expenses of the firm would be reduced by $6,700. What effect would this action have on Richmond's net income? (Ignore income tax in your calculations.)

Richmond's net income would Answerdecreaseincrease by $Answer.

c. It is estimated that if an additional $9,000 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 Answer
Cost of sales Answer
Gross profit Answer
Direct expenses Answer
Common expenses Answer
Total expenses Answer
Net income (Loss) Answer

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