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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9be9518c-51b7-4bb1-8036-854b6000ee8b%2Fb702e4ee-0780-41a2-807a-74eb01ee287f%2Fjcq57ee_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9be9518c-51b7-4bb1-8036-854b6000ee8b%2Fb702e4ee-0780-41a2-807a-74eb01ee287f%2Fscyndw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### 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.
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