M&M Manufacturing has provided the following comparative income statements: Prep

Question

M&M Manufacturing has provided the following comparative income statements:

Prepare a horizontal analysis of M&M’s 2014 income statement. (Round percentage answers to 2 decimal places, e.g. 1.64%. If amount and percentage are a decrease enter the numbers using either a negative sign preceding the number e.g. -4,527 or -1.64% or parentheses e.g. (4,527) or (1.64%).)

2012 2013 2014 Net sales $113,490 $124,500 $134,040 Cost of goods sold 60,240 63,230 71,000 Gross margin 53,250 61,270 63,040 Selling and administrative expenses 21,980 28,670 34,990 Depreciation 3,730 6,300 8,050 Operating profit 27,540 26,300 20,000 Income taxes 9,180 6,575 5,000 Net income $18,360 $19,725 $15,000

Explanation / Answer

2014 2013 change % change Net sales 134040 124500 9540 9540/124500=7.66% cost of goods sold 71000 63230 7770 7770/63230=12.29% Gross margin 63040 61270 1770 1770/61270=2.89% Selling and administrative expenses 34990 28670 6320 6320/28670=22.04% Depreciation expense 8050 6300 1750 1750/6300=27.78% operating profit 20000 26300 -6300 -6300/26300=-23.95% Income tax 5000 6575 -1575 -1575/6575=-23.95% net income 15000 19725 -4725 -4725/19725=-23.95%

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