Accounting - Analysis



Accounting - Analysis

Scenario 1

Increase average selling price by 20%. This increase is expected to lower sales volume so that total sales will increase only 5%.

Data:

Family Department Store

Income Statement

For the Year ended December 31, 2013

Net Sales

$ 700, 000

Cost of Goods Sold

$ 553, 000

Gross Profit

$ 147, 000

21%

Operating Expenses

Selling Expenses

$ 100, 000

Administrative Expenses

$ 20, 000

$ 120, 000

17%

Net income

$27, 000

Family Department Store

Income Statement

For the Year ended December 31, 2013

Net Sales

$ 735, 000

Cost of Goods Sold

$ 553, 000

Gross Profit

$ 182, 000

25%

Operating Expenses

Selling Expenses

$ 100, 000

Administrative Expenses

$ 20, 000

$ 120, 000

16%

Net income

$ 62, 000

By increasing total sales by 5%, the net ...