Reference no: EM132998777

Wolford Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attracting business away from city areas.

At the end of the company's fiscal year on November 30, 2017, these accounts appeared in its adjusted trial balance.

Accounts Payable$ 29,480
Accounts Receivable 18,920
Accumulated Depreciation-Equipment 74,800
Cash8,800Common Stock 38,500
Cost of Goods Sold 675,730
Freight-Out 6,820
Equipment 172,700
Depreciation Expense 14,850
Dividends 13,200
Gain on Disposal of Plant Assets 2,200
Income Tax Expense 11,000
Insurance Expense 9,900
Interest Expense 5,500
Inventory 28,820
Notes Payable 47,850
Prepaid Insurance 6,600
Advertising Expense 36,850
Rent Expense 37,400
Retained Earnings 15,620
Salaries and Wages Expense 128,700
Sales Revenue 994,400
Salaries and Wages Payable 6,600
Sales Returns and Allowances 22,000
Utilities Expense 11,660

Problem 1: Calculate the profit margin and the gross profit rate.

Problem 2: 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 $ 44,487 and expenses by $ 64,460. Compute the expected new net income. Then, compute the revised profit margin and gross profit rate.