Carr Auto Wholesalers had sales of $1,040,000 in 20XX, and the cost of goods sold represented 74 percent of sales. Selling and administrative expenses were 12 percent of sales. Amortization expense was $11,000 and interest expense for the year was $14,000. The firm’s tax rate is 30 percent. Q: Compute earnings after taxes using the percentage-of-sales method. (Image 1 is the reference) Q: Assume the firm hires Ms. Hood, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 14 percent of sales, sales can be increased to $1,090,200. The extra sales effort will also reduce cost of goods sold to 70 percent of sales (There will be a larger mark-up in prices as a result of more aggressive selling). Amortization expense will remain at $11,000. However, more automobiles will have to be carried in inventory to satisfy customers, and interest expenses will go up to $21,200. The firm’s tax rate will remain at 30 percent. Compute revised earnings after taxes based on Ms. Hood’s suggestions for Carr Auto Wholesalers. (Image 2 is the reference)
Carr Auto Wholesalers had sales of $1,040,000 in 20XX, and the cost of goods sold represented 74 percent of sales. Selling and administrative expenses were 12 percent of sales. Amortization expense was $11,000 and interest expense for the year was $14,000. The firm’s tax rate is 30 percent.
Q: Compute earnings after taxes using the percentage-of-sales method. (Image 1 is the reference)
Q: Assume the firm hires Ms. Hood, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 14 percent of sales, sales can be increased to $1,090,200. The extra sales effort will also reduce cost of goods sold to 70 percent of sales (There will be a larger mark-up in prices as a result of more aggressive selling). Amortization expense will remain at $11,000. However, more automobiles will have to be carried in inventory to satisfy customers, and interest expenses will go up to $21,200. The firm’s tax rate will remain at 30 percent. Compute revised earnings after taxes based on Ms. Hood’s suggestions for Carr Auto Wholesalers. (Image 2 is the reference)
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