Three years ago, Patricia Johnson and her brother-in-law John Williams opened Larkspur Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2022 were disappointing. LARKSPUR DEPARTMENT STORE Income Statement For the Year Ended December 31, 2022 Net sales Cost of goods sold Gross profit Operating expenses $720,000 576,000 144,000 Selling expenses $102,500 Administrative expenses 20,500 123,000 Net income $21,000 Patricia believes the problem lies in the relatively low gross profit rate of 20%. John believes the problem is that operating expenses are too high. Patricia thinks the gross profit rate can be improved by making two changes. (1) Increase average selling prices by 15%; this increase is expected to lower sales volume so that total sales dollars will increase only 4%. (2) Buy merchandise in larger quantities and take all purchase discounts. These changes to purchasing practices are expected to increase the gross profit rate from its current rate of 20% to a new rate of 25%. Patricia does not anticipate that these changes will have any effect on operating expenses. John thinks expenses can be cut by making these two changes. (1) Cut 2023 sales salaries of $61,500 in half and give sales personnel a commission of 2% of net sales. (2) Reduce store deliveries to one day per week rather than twice a week; this change will reduce 2023 delivery expenses of $41,000 by 40%. John feels that these changes will not have any effect on net sales. Patricia and John come to you for help in deciding the best way to improve net income. Answer the following.