LOWRY DEPARTMENT STORE Income Statement For the Year Ended November 30, 2010 Sal
ID: 2442115 • Letter: L
Question
LOWRY DEPARTMENT STOREIncome Statement
For the Year Ended November 30, 2010
Sales revenues
Sales $ 1,273,736
Less: Sales returns and allowances 28180
Net Sales 1245556
Cost of Goods Sold 892320
Gross Profit 353236
Operating Expenses
Salaries expense $ 164853
Rent expense 47906
Utilities expense 14935
Depr. exp.-Store equip. 13386
Insurance expense 12681
Delivery expense 8736
Depr. exp.-Delivery equip. 5636
Property tax expense 4932
Total operating expenses 273065
Income from operations 80171
Other revenues and gains
Gain on sale of equipment $ 2818
Other expenses and losses
Interest expense 7045
4227
Income before income taxes 75944
Income tax expense 14090
Net income $ 61854
Explanation / Answer
So, Net sales 1,245,556 Salary Expence 164,853 If company will compensate thier sales forse on stricly 20% commission the Salary Expence will be 1,245,556*.20=249,111.2 Salary Expence will increase 249,111.2-164,853=84,258.2 If Net sales woul not increse Net Income - Increase in salary expense=61854-84258.2=(22,404.2) In order that Net income will be the same or higher Net sales have to be hiher than 84,258.2*1.2=101,109.84 Net sales has to be 1,245,556+(101,109.84+)=1,346,665.8+ So, if Net sales will not increase substantionally this proposal is worstless.
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