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ACT 101

East West University
Assignment – 1 Course Title: Financial Accounting Course Code: Act 101

Submitted To: Muhammad Zahirul Islam
Senior Lecturer Department Of Business Administration East West University

Submitted By: Marufa Jahan Writu Sen Nusrat Jahan Sarah Tasnime Nahid Hasan Id: 2006-3-10-059 Id: 2008-2-10-106 Id: 2008-2-10-107 Id: 2008-2-10-110 Id: 2008-2-10-224

Department Of Business Administration East West University

Submission Date: August 5,2009

000 120.000 $ 217.000 ×23 ⇒Gross Profit =161.000 = $ 756.000 + $ 56.000 Workings: 1.000 = $ 700.000 ⇒ ⇒ ⇒G ross Profit =7.000 $ 97.000 539.000 $ 756.  Total Sales will increase = $ 700.000 * 8% Net Sales = $ 56.ACT 101 Debbie changes are implemented: FEDCO DEPARTMENT STORE Income Statement For the year ended December 31.000 Gross Profit = 23 7.000 2. 2005 Net Sales Less: Cost of Goods sold Gross Profit Less: Operating Expenses: Selling Expenses Administrative Expenses Net Income $ 100. Total sales will increases by 8% for selling price increases by 17%. Gross Profit rate will increase by 3% Gross Profit rate will be = (20+3) % = 23% ∴ Gross Profit ×100 = 23 Net Sales Gross Profit ×100 = 23 700.000 20.000 .

2005 Net Sales Less: Cost of Goods sold Gross Profit Less: Operating Expenses: Selling Expenses: Salaries Expenses Sales Commission Delivery Expenses Administrative Expenses Net Income $ 700.000 88.000 = $ 539.ACT 101 Gross Profit = Net Sales – Cost of Goods Sold ⇒ Cost of Goods Sold = Net Sales – Gross Profit = $ 700.000 $ 140.000 Mike’s Ideas are adopted: FEDCO DEPARTMENT STORE Income Statement For the year ended December 31.000 560.000 24.000 20.000 14.000 – 161.000 $ 30.000 $ 52.000 .

According to Debbie’s thinking we can see that he wants to increase the average selling price by 17%. the total sales might not increase that much that he thought. Reduced Delivery Expenses by 40% of $ 40. Sales Commission = Total Sales x 2% = $ 700. Delivery Expenses = $ (40. If the gross profit rate increase. Even though. the total sales will increase by 8%.000/2 = $ 30. So Debbie should increase the average selling price less than 17% and it might increase the total sales more than 8%. Cut 2004 sales salaries of $ 60. Salaries Expense = $ 60. And if he wants to buy merchandise in lager quantity and take all purchase discounts. .000 2. the gross profit will increase and if gross profit increase the cost of goods sold will decrease.000 Give sales personnel a commission of 2 % of net sales.ACT 101 Workings: 1.000 So. These changes are expected to increase the gross profit rate by 3% and it will be 23%.000 x 40% = $ 16. this increase is expected to lower sales volume might reduce the total sales.000 x 2% = $ 14.000 – 16000) = $ 24. So the higher the price the lower the demand.000 B) Our Recommendation: According to Debbie.000 in half. But in condition.000 = $ 40. the average selling price will be a bit more than usual so if there is any competitor in the market or there is any alternate product.

Such as some of the employee will do better they can increase the sales but some of the employee who is not skilled can not increase the sales. That the reason the overall expenses are goes down. So they should go for both ideas.000 539. But if they go with their both of the ideas then they can profit more than they receive now. And it only affect if they merge those two plans. It has both positive and negative effect.ACT 101 On the other hand if we consider Debbie’s both ideas we can see that net sales is increasing and cost of goods sold is decreasing.000 = 28 .000. 2005 Net Sales Less: Cost of Goods sold Gross Profit $ 756. And it will be cover as they earn first. if they implement both of their ideas then the net income will increase $20. He wants to cut the salary of the sales employees and give them a commission of 2%.70 % According to Mike. 217 . Gross rate will increase more than 23%. So our recommendation is that. Because individual implement could not do much for them.000 ×100 Gross profit rate = 756 . Both Sets of proposed changes are made: FEDCO DEPARTMENT STORE Income Statement For the year ended December 31. So our recommendation to Debbie and Mike is that.000 to $129. Implementing Both. We can give advice that they should go with the both of those ideas.000 $ 217. the ideas individually do not affect much that they want. And if the delivery reduces to one day per week rather than twice a week it can reduce the delivery expense by 40%.000 . As we see. One hand it is a good idea though it can decrease salaries expenses. If they merge those ideas then they can achieve as they had before. That the reason net income will increase then before. they can do better if they think about our advice and start doing business with those two.

. we can see if we go with both ideas the profit margin will increase more then the single implement.000 20.000 88.000 $ 129.ACT 101 Less: Operating Expenses: Selling Expenses: Salaries Expenses Sales Commission Delivery Expenses Administrative Expenses Net Income $ 30.000 14.000 Note: As we recommend. So its will be best for their Department Store.000 24.