Comparative Income Statement This Year Last Year $7,330,000 $5,570,800 4,750,000

Question

Comparative Income Statement This Year Last Year $7,330,000 $5,570,800 4,750,000 3,513,000 Sales Cost of goods sold Gross margin Selling and administrative expenses: 2,580,000 2,057,800 Selling expenses 1,400,000 1,073,500 708,500 Administrative expenses Total expenses Net operating income 615,500 2,108,500 1,689,000 368,800 471,500 100,000 Interest expense 94,000 Net income before taxes S 371,500 274,800 Members of the company's board of directors are surprised to see that net income increased by only $96,700 when sales increased by $1,759,200 Required 1. Express each year's income statement in common-size percentages. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) This Year Last Year Sales Cost of goods sold Gross margin Selling and administrative expenses Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes

Explanation / Answer

Comon Size Income Statement Normal Income Statement This Year Last Year This Year Last Year Sales 100.0% 100.0%        7,330,000       5,570,800 Cost of goods sold 64.8% 63.1%        4,750,000       3,513,000 Gross margin 35.2% 36.9%        2,580,000       2,057,800 Selling and administrative expenses        Selling expenses 19.1% 19.3%        1,400,000       1,073,500        Adinistrative expenses 9.7% 11.0%            708,500           615,500 Total selling and administrative expenses 28.8% 30.3%        2,108,500       1,689,000 Net operating income 6.4% 6.6%            471,500           368,800 Interest expense 1.4% 1.7%            100,000             94,000 Net income before taxes 5.1% 4.9%            371,500           274,800

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