Save & ExitSubmit Question 18 (of 125 18. 185 points Problem 2-12 Determination of profitability LO2- Lemon Auto Wholesalers had sales of 5920,000 last year, and cost of goods sold represented 75 percent of sales. Selling and administrative expenses were 13 percent of sales. Depreciation expense was 17,000 and interest expense for the year was $11,000. The firm's tax rate is 30 percent a. Compute earnings after taxes Lemon Auto Wholesalers Income Statement b-1. Assume the firm hires Ms. Carr, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 15 percent of sales, sales can be increased to $970,800. The extra sales effort will also reduce cost of goods sold to 71 percent of sales. (There will be a larger markup in prices as a result of more aggressive selling.) Depreciation expense will remain at $17,000. However, more automobiles will have to be carried in inventory to satisfy customers, and interest expense will go up to $18,500. The firm's tax rate will remain at 30 percent. Compute revised earnings after taxes based on Ms. Carr's suggestions for Lemon Auto Wholesalers. (Round taxes and earnings after taxes to 1 decimal place.) Lemon Auto Wholesalers Income Statement b-2. Will her ideas increase or decrease profitability? 0 Increase profitability Decrease profitability