E8-2A. Analyzing Operational Changes Operating results for department B of Delta

Question

E8-2A. Analyzing Operational Changes Operating results for department B of Delta Company during 2016 are as follows: Sales. Cost of good $540,000 378,000 $162,000 66,000 $186,000 $(24,000) Common expenses .. . Net loss . .. . If department B could maintain the same physical volume of product sold while raising selling prices an average of 15% and making an additional advertising expenditure of $45,000, what would be the effect on the department's net income or net loss? (Ignore income tax in your calculations.)

Explanation / Answer

Revised sales = 540000 * 1.15

= $ 81000

Operating result

Firm will make 12000 $ net profit

Sales $ 621000 COGS $ 378000 Gross Profit $ 243000 Direct Expense $ 120000 Common Exp $ 66000 Additional adv expense $ 45000 Net Profit $ 12000

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