Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
using either a negotive son preceairg tne number es: -43 or partentheses es 143H Monty Corporation Income Statement $ 5 5 Three years ago, Karen
using either a negotive son preceairg tne number es: -43 or partentheses es 143H Monty Corporation Income Statement $ 5 5 Three years ago, Karen Suez and her brother-in-law Reece Jones opened Monty Corporation. For the first two years, business was good, but the following condensed income results for 2022 were diseppointing. Karen believes the problem lies in the relatively low gross profit rate (gross profit divided by net sales) of 20% Reece believes the problem is that operating expenses are too high. Karen thinks the gross profit rate can be improved by making two changes. She does not anticipate that these changes will hove any effect on operating expenses. 1. Increase average selling prices by 15%. This increase is expected to lower sales volume so that total sales will increase only 4%. 2. Buy merchandise in larger quantities and take all purchese discounts: These changes to selling prices and purchasing proctices are expected to increase the gross profit rate from 20% to a new rate of 25% Reece thinks expenses can be cut by making these two changes. He feels that these changes will not have any effect on net sales. 1. Cut 2023 sales salaries of $60,000 in half and give soles 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 $40,000 by 40% Keran snd Reece come to you for help in deciding the best wsy to improve net income
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started