Question

Your sister operates Hercules Parts Company, a mail order boat parts distributorship that is in its third year of operations. The following is the single step income statement for the year ended December 31, 2016 Hercules Parts Company Income Statement Year Ended December 31, 2016 Revenues: $ 600,000 Net sales revenue Expenses: Cost of Goods Sold Sales Salaries Expense Freight Out Expense (shipping charges) Advertising Expense Office Salaries Expense Office Supplies Expense Interest Expense $ $ $ 420,000 38,850 20,000.00 7,000.00 $ 31,200 $ 2,800.00 $ 10,000.00 Total Expenses Net Income $529,850 70.150 Your sister had the following inventory balances: 38,000.00 44,000.00 18,000.00 1/01/16 $ 12/31/16 Projected inventory as of 12/31/17 $ Your sister is considering a proposal to increase net income by offering their sales representatives a salary commission on every unit they sell. This should help increase sales. They also will be able to bargain for a better purchase price for their inventory, control their inventory more efficiently by adopting just-in-time inventory and by shipping all merchandise FOB Shipping Point. Presently, all merchandise is shipped FOB Destination. (Assume that the interest expense will remain the same in 2017) It is estimated that more creative marketing (in 2017) will enable Hercules to have a 20% increase in the Net Sales they had in 2016 by attracting new customers. Assume the new shipping terms (in 2017) will cause Hercules to have 15% decrease in the Net Sales they had in 2016 Due to intense negotiations, Hercules was able to reduce the cost of goods sold to 65% of Net Sales Assume that Sales Salaries Expense, Advertising Expense, Office Salaries Expense and Office Supplies Expense will all increase by 10%. Assume that all sales representatives will now receive a 5% commission on every sales dollar. This will create a new expense that we will call Sales Commission Expense.

I only want the answers to 3 & 4 because I already have the answers to questions 1 & 2 (requirements 1 and 2 are posted below):

Answer 1

Poco No Requirement : Inventory Turnover : 2016 2017 Avg. Tnventory Opa. Inventory +cis Inr. 38000 + 44000 35000+ 44000 31000 41000 sold. 409500 420000 Cost of goods Inventory Tlo 409500 31000 u20000 41000 13.20 times - 10.24 times Inventory Tlo ratio shows how able to control its merchandise efficiently co.is 11 shows how fost company sells its inventory As inventory Tlo ratio in 2014 is higher than 2016. appears that Heroes Lill do a better job controlling their Inventory

Pago Na Data Requirement 4: Proposed changes are recommended basis on below: company is able to increase sales, though are changes in shipping terms there Geross profit increases by 5% Though, profit Net profit decreases increases in terms in of % terms arount. overall