Three years ago Maggie Green and her brother-in-law Joe Longway opened FedCo Department Store. For the first 2 years, business was good, but the following condensed income results for 2016 FEDCO DEPARTMENT STORE Income Statement For the Year Ended December 31, 2016 Net sales Cost of goods sold Gross proft $700,000 546,000 154,000 Selling expenses Administrative expenses 25,000 $100,000 125,000 $ 29,000 Net Income Maggie believes the problem Ses in the relatively low gross profit rate (gross profit divided by net sales) of 22%, Joe believes the problem is that operating expenses are too high Maggie thinks the gross profit rate can be improved by making two changes: 1) Increase the average selling prces by 17%, this increase is expected to lover sales volume so that total sales wil increase oly 6%. 2) Buy merchandise in larger quantities and take all purchase discounts; these changes are expected to increase the gross profit rate by 3%. Maggie does not anticipate that these changes wl have any effect on operating expenses Joe thinks expenses can be cut by making these two changes: 1) Cut 2016 sale salaries of $60,000 in ha and give sales personnel a commission of 2% of net sales 2) Redace store deliveries to one day per week rather than twice per week, this change will rechace 2016 delivery expenses of $30,000 by 40%. Joe feels that these changes will not have any effect on sales. Maggie and Joe come to you for help in deciding the best way to improve net income. Address the following: A) Project 2017 net income assuming 1) Maggie's changes are implemented and 2) Joe's ideas are adopted B) What is your recommendation to Maggie and Joe? C) Project net income if both sets of proposed changes are made REQUIRED FOR SUBMISSION FEDCO DEPARTMENT STORE Income Statement For the Year Ended December 31, 2016 Net sales Cost of goods sold Gross profit Operating Expenses $700,000 546,000 154,000 Selling expenses Administrative expenses $100,000 25,000 125,000 $ 29000 Net Income Maggie beleves the problem lies i the relatively low gross profit rate (ross profit divided by net sales) of 22%, Joe believes the problem is that operating expenses are too high. Maggie thinks the gross profit rate can be improved by making two changes: 1) Increase the average selling prices by 17%, this increase is expected to lower sales volme so that total sales will increase only 6% 2) Buy merchandise in larger quantities and take all purchase discounts; these changes are expected to increase the gross profit rate by 3%, Maggie does not anticipate that these changes will have any efiect on operating expenses Joe thinks expenses can be cut by making these two changes: 1) Cut 2016 sale salaries of $60,000 in half and give sales personnel a commission of 2%of net sales. 2) Reducestore deliveries to one day per week rather than twice per week; this change will reduce 2016 delivery expenses of $30,000 by 40%, Joe feels that these changes will not have any effect on sales. Magzie and Joe come to you for help in deciding the best way to improve net income. Address the following A) Project 2017 net income assuming 1) Maggie's changes are implemented and 2) Joe's ideas are adopted B) What is your recommendation to Maggie and Joe? C) Project net income if both sets of proposed changes are made. REQUIRED FOR SUBMISSION 1-work sheet (Excel) showing 4 income statements inchding common-size percentages 2016, Maggie's proposal, Joe's proposal, and their combined proposal), AND 2-amemo (Word) to provide yoar recommendation