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: Garden Department All Other Departments Sales $840,000 $6,000,000 Cost of sales 504,000 3,900,000 Gross profit 336,000 2,100,000 Direct expenses 270,000 682,500 Common expenses 120,000 780,000 Total expenses 390,000 1,462,500 Net income (Loss) $(54,000) $637,500 a. Calculate the gross profit percentage for the garden department and for the other departments as a group. Garden department Answer% All other departments Answer% b. Suppose that if the garden department were discontinued, the space occupied could be rented to an outside firm for $45,000 per year, and the common expenses of the firm would be reduced by $11,200. What effect would this action have on Richmond's net income? (Ignore income tax in your calculations.)
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:
Garden Department All Other Departments
Sales $840,000 $6,000,000
Cost of sales 504,000 3,900,000
Gross profit 336,000 2,100,000
Direct expenses 270,000 682,500
Common expenses 120,000 780,000
Total expenses 390,000 1,462,500
Net income (Loss) $(54,000) $637,500
a. Calculate the gross profit percentage for the garden department and for the other departments as a group.
Garden department Answer%
All other departments Answer%
b. Suppose that if the garden department were discontinued, the space occupied could be rented to an outside firm for $45,000 per year, and the common expenses of the firm would be reduced by $11,200. What effect would this action have on Richmond's net income? (Ignore income tax in your calculations.)
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