The Haines Corp. shows the following financial data for 2012 and 2013. 2012 2013
ID: 2768736 • Letter: T
Question
The Haines Corp. shows the following financial data for 2012 and 2013.
2012
2013
Sales
$
3,230,000
$
3,370,000
Cost of goods sold
2,130,000
2,850,000
Gross profit
$
1,100,000
$
520,000
Selling & administrative expense
298,000
227,000
Operating profit
$
802,000
$
293,000
Interest expense
47,200
51,600
Income before taxes
$
754,800
$
241,400
Taxes (35%)
264,180
84,490
Income after taxes
$
490,620
$
156,910
For each year, compute the following ratios and indicate how the change in each ratio will affect profitability in 2013. (Input your answers as a percent rounded to 2 decimal places.)
2012
2013
Profitability
a.
Cost of goods sold to sales
%
%
(Click to select)No ChangeDecreaseIncrease
b.
Selling and administrative expense to sales
%
%
(Click to select)DecreaseNo ChangeIncrease
c.
Interest expense to sales
%
%
(Click to select)IncreaseDecreaseNo Change
The Haines Corp. shows the following financial data for 2012 and 2013.
Explanation / Answer
Answer
Cost of goods sold to sales ratio= Cost of goods sold to sales / net sales *100
2012 = 2,130,000 / 3,230,000 *100 =65.94%
2013 = 2,850,000 / 3,370,000*100 =84.56%
Selling and administrative expense to sales =
Selling and administrative expense to sales / sales *100
2012 = 298,000 /3,230,000 *100=9.23%
2013 = 227,000 / 3,370,000 *100=6.74%
Interest expense to sales ratio = Interest expense to sales / sales *100
2012 = 47,200 / 3,230,000*100=1.46%
2013= 51,600 /3,370,000=1.53%
2012
2013
Profitability %
A
Cost of goods sold to sales ratio
65.94%
84.56%
28.24% increase
B
Selling and administrative expense to sales
9.23%
6.74%
26.98% decrease
C
Interest expense to sales ratio
1.46%
1.53%
4.80% increase
2012
2013
Profitability %
A
Cost of goods sold to sales ratio
65.94%
84.56%
28.24% increase
B
Selling and administrative expense to sales
9.23%
6.74%
26.98% decrease
C
Interest expense to sales ratio
1.46%
1.53%
4.80% increase
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