The vice president of marketing and the director of human resources have developed a proposal whereby the company would compensate the sales force on a strictly commission basis. given the increased incentive, they expect net sales to increase by 15%. as a result, they estimate that gross profit will increase by $58,238 and expenses by $84,384. compute the expected new net income. then, compute the revised profit margin and gross profit rate. (ignore income tax effects.)

Additional information

The previous net income was 45041 and the net sales was 906984

compute the revised profit margin and gross profit rate.

Profit Margin = 96704

GP Rate = 9,27%

Explanation:

Profit Margin Ratio = (Net Profit/Net Sales) x 100

Previous Year:

Net sales = 906,984

Less: Net Income= 45,041

Expense = 861,943

Current Year:

Net Sales= 906984+(15%*906984)= 1043031,60

Less:Expenses=861943+84384= 946327

Expected Net Income= 96704

Profit Margin Ratio = (96704/1,043,031.60) x 100 = 9,27%

Net increase in G.P. =58238

Net increase in Sales = (906,984x15%)= 136,047.60

GP Ratio = (58238.00/136047,60) x 100 = 42.80%

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