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:

		Garden Department		All Other Departments
Sales					$840,000		$6,000,000
Cost of sales		504,000		3,900,000
Gross profit		336,000		2,100,000
Direct expenses		270,000		682,500
Common expenses		120,000		780,000
Total expenses		390,000		1,462,500
Net income (Loss)		$(54,000)		$637,500

a. Calculate the gross profit percentage for the garden department and for the other departments as a group.

Garden department Answer%

All other departments Answer%

b. Suppose that if the garden department were discontinued, the space occupied could be rented to an outside firm for $45,000 per year, and the common expenses of the firm would be reduced by $11,200. What effect would this action have on Richmond's net income? (Ignore income tax in your calculations.)

Richmond's net income would ANSWER by $Answer.

c. It is estimated that if an additional $15,000 were spent on advertising, prices in the garden center could be raised an average of 5% without a change in physical volume of products sold. What effect would this have on the operating results of the garden department? (Again, ignore income tax in your calculations.)

Use a negative sign to indicate a net loss answer; otherwise do not use negative signs with your answers.

Garden Department Income Statement
Sales	Answer
Cost of sales	Answer
Gross profit	Answer
Direct expenses	Answer
Common expenses	Answer
Total expenses	Answer
Net income (Loss)	Answer