Party-Time T-Shirts sells T-shirts for parties at the local college. The company com plated the first year of operations, and the shareholders are generally d with operating results as shown

Party-Time T-Shirts sells T-shirts for parties at the local college. The company com plated the first year of operations, and the shareholders are generally d with operating results as shown by the following income statement: Bill ldebrand, the controller, is considering how to expand the business. He proposes two ways to increase profits to $100,000 during 2018. a. ldebrand believes he should advertise more heavily. He believes additional advertising costing 320,000 will increase net sales by 30% and leave administrative expense unchanged. Assume that Cost of Goods Sold will remain at the same percentage of net sales as in 2017, so if net sales increase in 2018, Cost of Goods Sold will increase proportionately. b. ldebrand proposes selling higher-margin merchandise, such as party dresses, in addition to the existing product line. An importer can supply a minimum of 1,000 dresses for $40 each; Party-Time can mark these dresses up 100% and sell them for $80. ldebrand realizes he will have to advertise the new merchandise, and this advertising will cost $5,000. Party-Time can expect to sell only 80% of these dresses during the coming year. ldebrand determine which plan to pursue. Prepare a multi-step income statement for 2018 to show the expected net income under each plan. Transcribed Image Text: PARTY-TIME T-SHIRTS
Income Statement
Year Ended December 31, 2017
Net Sales Revenue
$ 350,000
Cost of Goods Sold
210,000
Gross Profit
140,000
Operating Expenses:
Selling Expense
40,000
Administrative Expense
25,000
Net Income
$ 75,000

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