the gross method is easier to calculate as you can ignore depreciation. Remember to account for all assets (including working capital) and disregard salvage value. 11. Upon comparing actual operating results at the end of year 4 with the projected operations, iMost Company saw the following impact to the Divisions actual operating results: Because of competitive pressure, iMost Company was forced to reduce sales prices to maintain adequate sales levels. This situation caused sales revenue to decrease 2%. Negotiations with several suppliers resulted in 5% reduction to direct material costs. Due to labor environment, the cost of direct labor was 6% higher than anticipated. Fixed overhead costs were $17,500 higher than projected. iMost Company was able to consolidate some selling and administrative function with other departments and reduced the Division's expenses by 20%. a. Calculate the Pretax income for year 4 considering all the items mentioned above. Actual Y4 Sales revenue glish (United States) Direct material Direct labor Overhead Selling & administrative Total expenses Income before Tax Income tax expense Net Income 435,708 Decrease by 2% 59,132 Decrease by 5% 94,255 Increase by 6% 152,767 Increase by $17,500 23,968 Reduce by 20% 330,122 105,586 33,788 Use tax rate from connect 71,798 Focus