**Analyze Operational Changes**Richmond’s is a retail store with eight departments, including a garden department that has been operating at a loss. The following condensed income statement provides the latest year's operating results:| | Garden Department | All Other Departments ||-----------------------|-------------------|-----------------------|| **Sales** | $336,000 | $2,400,000 || **Cost of Sales** | 201,600 | 1,560,000 || **Gross Profit** | 134,400 | 840,000 || **Direct Expenses** | 108,000 | 273,000 || **Common Expenses** | 48,000 | 312,000 || **Total Expenses** | 156,000 | 585,000 || **Net Income (Loss)** | $(21,600) | $255,000 |a. Calculate the gross profit percentage for the garden department and for the other departments as a group.- **Garden Department** - [Input box for percentage] %- **All Other Departments** - [Input box for percentage] %b. Suppose that if the garden department were discontinued, the space occupied could be rented to an ### Transcription for Educational Website**Scenario Analysis:****b. Cost Benefits of Discontinuing the Garden Department**- **Assumption:** The space occupied by the garden department can be rented out for $18,000 per year.- **Cost Savings:** Common expenses for the firm would be reduced by $4,500.- **Objective:** Determine the effect of this action on Richmond’s net income (excluding tax considerations).**Question:** By how much would Richmond's net income change?- **Answer Input Box:** [0]---**c. Impact of Increased Advertising Spend**- **Assumption:** Spending an additional $6,000 on advertising could allow a price increase of 5% for the garden center without altering the sales volume.- **Objective:** Assess the impact on the garden department's operating results (ignoring tax effects).**Instruction:** Use a negative sign to indicate a net loss; otherwise, do not use negatives.---**Garden Department Income Statement**| **Description** | **Amount ($)** ||------------------------|----------------|| Sales | 0 || Cost of sales | 0 || Gross profit | 0 || Direct expenses | 0 || Common expenses | 0 || Total expenses | 0 || Net income (Loss) | 0 |This table outlines a blank income statement for the garden department, showing fields for sales, cost of sales, gross profit, direct expenses, common expenses, total expenses, and net income (loss), each represented as zero to modify as required.

Income statement is one of the financial statements of business, which shows all income and expenses…

Analyze Operational changes Richmond's is a retail store with eight departments, including a garden department that has been operating at a loss. The following condensed income statement gives the latest year's operating results: Sales Cost of sales Gross profit Direct expenses Common expenses Total expenses Net income (Loss) Garden All Other Department Departments $336,000 201,600 134,400 108,000 48,000 156,000 $(21,600) % All other departments 0 $2,400,000 1,560,000 840,000 273,000 312,000 585,000 $255,000 a. Calculate the gross profit percentage for the garden department and for the other departments as a group. Garden department 0 % b. Suppose that if the garden department were discontinued, the space occupied could be rented to an

Analyze Operational changes Richmond's is a retail store with eight departments, including a garden department that has been operating at a loss. The following condensed income statement gives the latest year's operating results: Sales Cost of sales Gross profit Direct expenses Common expenses Total expenses Net income (Loss) Garden All Other Department Departments $336,000 201,600 134,400 108,000 48,000 156,000 $(21,600) % All other departments 0 $2,400,000 1,560,000 840,000 273,000 312,000 585,000 $255,000 a. Calculate the gross profit percentage for the garden department and for the other departments as a group. Garden department 0 % b. Suppose that if the garden department were discontinued, the space occupied could be rented to an

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Analyzing Operational Changes Operating results for department B of Shaw Company during 2016 are as follows: Sales Cost of goods sold Gross profit Direct expenses Common expenses Total expenses Net loss $770,000 480,000 290,000 215,000 123,000 338,000 $(48.000) If department B could maintain the same physical volume of product sold while raising selling prices an average of 10% and making an additional advertising expenditure of $40,000, what would be the effect on the department's net income or net loss? (Ignore income tax in your calculations.) Use a negative sign with your answer to indicate if the effect increases the company's net loss. If Department B increased its selling price by 10%, the effect on net income (loss) would be $
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