EXERCISE 15-1 Common-Size Income Statement (L015-1) A comparative income stateme

Question

EXERCISE 15-1 Common-Size Income Statement (L015-1) A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto McKenzie Sales, Ltd. Comparative Income Statement Sales . Cost of goods sold.... Gross margin Selling and administrative expenses: This Year Last Year $8,000,000 $6,000,000 4,984,000 3,516,000 3,016,000 2,484,000 1,480,000 1,092,000 618,000 2.192,000 1,710,000 824,000 774,000 84,000 $ 728,000 $ 690,000 Selling expenses 712,000 Administrative expenses Total expenses . Net operating income Interest expense Net income before taxes . 96,000

Explanation / Answer

Calculation of common size percentages Particulars This Year Last Year Sales 100% 100% Cost of goods sold 62.3% 58.6% (4984000/8000000)*100 (3516000/6000000)*100 Gross Margin 37.7% 41.4% (3016000/8000000)*100 (2484000/6000000)*100 Selling and Administrative expenses Selling expense 18.5% 18.2% (1480000/8000000)*100 (1092000/6000000)*100 Administrative expense 8.9% 10.3% (712000/8000000)*100 (618000/6000000)*100 Total Expense 27.4% 28.5% (18.5%+8.9%) (18.2% + 10.3%) Net operating Income 10.3% 12.9% (824000/8000000)*100 (774000/6000000)*100 Interest expense 1.2% 1.4% (96000/8000000)*100 (84000/6000000)*100 Net income before taxes 9.1% 11.5% (728000/8000000)*100 (690000/6000000)*100

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