Assume a company\'s Income Statement for Year 12 is as follows: Year 12 in 000s

Question

Assume a company's Income Statement for Year 12 is as follows: Year 12 in 000s Income Statement Data Net Revenues from Footwear Sales Cost of Pairs Sold Warehouse Expenses Marketing Expenses Administrative Expenses Operating Profit (Loss) Interest Income (expenses) Pre-tax Profit (Loss) Income laxes Net Profit (Loss $300,000 190,000 15,000 40,000 8,000 47,000 (10,000) 37,000 11,100 $25,900 Based on the above data, which of the following statements is false? Interest expenses are 3.3% of net revenues. Warehouse expenses are 5.0% of net revenues. Administrative expenses are 3.9% of net revenues. Marketing costs are 13.3% of net revenues. Cost of pairs sold are 63.3% of net revenues.

Explanation / Answer

Solution:

Details provided below:

The proportion of any expense in relation to revenue can calculated with the use of following formula: Percentage of net revenues = Expense amount / Revenue * 100

Table showing calculation for all the options:

Expense amount

X

Net revenue

Y

Percentage of net revenues =

X / Y * 100

2.6%

( this value is given as 3.9%)

False

The administrative expense 2.6% statement is calculated above 3.9%.

Expense

Expense amount

X

Net revenue

Y

Percentage of net revenues =

X / Y * 100

Cost of pairs sold 190,000 300,000 63.3% Warehouse expense 15,000 300,000 5.0% Administrative expense 8,000 300,000

2.6%

( this value is given as 3.9%)

False

Interest expense 10,000 300,000 3.3% Marketing expense 40,000 300,000 13.3%

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