=+Your sister is considering a proposal to increase net income by offering sales discounts of 2/15, n/30, and by shipping all merchandise FOB shipping point. Currently, no sales discounts are allowed and merchandise is shipped FOB destination. It is estimated that these credit terms will increase net sales by 15%. The ratio ofthe cost of merchandise sold to net sales is expected to be 65%. All selling and administrative expenses are expected to remain unchanged, except for store supplies, miscellaneous selling, office supplies, and miscellaneous administrative ex¬

penses, which are expected to increase proportionately with increased net sales. The amounts ofthese preceding items for the year ended July 31, 2008, were as follows:

Store supplies expense $12,000 Miscellaneous selling expense 3,000 Office supplies expense 2,000 Miscellaneous administrative expense 1,000