Scribd
Upload
89 views1 page

Three Years Ago Carrie Dungy and Her Brother in Law Luke Barber PDF

Three years ago, Carrie Dungy and her brother-in-law Luke Barber opened FedCo Department Store. In 2009, business was disappointing with a low gross profit rate of 21% and high operating expenses. Carrie proposes increasing prices by 17% and buying in larger quantities to raise the gross profit rate by 3 percentage points. Luke proposes cutting sales salaries in half and reducing deliveries to once a week to lower expenses. They ask for a recommendation on the best way to improve net income.

Uploaded by

Anbu jaromia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
89 views1 page

Three Years Ago Carrie Dungy and Her Brother in Law Luke Barber PDF

Three years ago, Carrie Dungy and her brother-in-law Luke Barber opened FedCo Department Store. In 2009, business was disappointing with a low gross profit rate of 21% and high operating expenses. Carrie proposes increasing prices by 17% and buying in larger quantities to raise the gross profit rate by 3 percentage points. Luke proposes cutting sales salaries in half and reducing deliveries to once a week to lower expenses. They ask for a recommendation on the best way to improve net income.

Uploaded by

Anbu jaromia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Three years ago Carrie Dungy and her brother in law Luke

Barber
Three years ago, Carrie Dungy and her brother-in-law Luke Barber opened FedCo Department
Store. For the first two years, business was good, but the following condensed income results
for 2009 were disappointing.Carrie believes the problem lies in the relatively low gross profit rate
(gross profit divided by net sales) of 21%. Luke believes the problem is that operating expenses
are too high. Carrie thinks the gross profit rate can be improved by making both of the following
changes. She does not anticipate that these changes will have any effect on operating
expenses.1. Increase average selling prices by 17%.This increase is expected to lower sales
volume so that total sales will increase only 6%.2. Buy merchandise in larger quantities and take
all purchase discounts. These changes are expected to increase the gross profit rate by 3
percentage points. Luke thinks expenses can be cut by making both of the following changes.
He feels that these changes will not have any effect on net sales.1. Cut 2009 sales salaries of
$60,000 in half and give sales personnel a commission of 2% of net sales.2. Reduce store
deliveries to one day per week rather than twice a week; this change will reduce 2009 delivery
expenses of $30,000 by 40%.Carrie and Luke come to you for help in deciding the best way to
improve net income.InstructionsWith the class divided into groups, answer the following.(a)
Prepare a condensed income statement for 2010 assuming (1) Carrie’s changes are
implemented and (2) Luke’s ideas are adopted.(b) What is your recommendation to Carrie and
Luke?(c) Prepare a condensed income statement for 2010 assuming both sets of proposed
changes aremade.
View Solution:
Three years ago Carrie Dungy and her brother in law Luke Barber
SOLUTION-- http://accountinginn.online/downloads/three-years-ago-carrie-dungy-and-her-
brother-in-law-luke-barber/

For Solutions Visit accountinginn.online


Powered by TCPDF (www.tcpdf.org)

You might also like