Members of the company’s board of directors are surprised to see that net income
ID: 2493958 • Letter: M
Question
Members of the company’s board of directors are surprised to see that net income increased by only $258,000 when sales increased by $1,764,000.
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 This Year
Sales:
Cost of goods sold
gross margin
selling expense
administrative expense
net operating income
interest expense
net income before taxes
A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto:Explanation / Answer
1)
Prepare the income statement in common size percentages Particulars This year % Last year % Sales 7350000 100% 5586000 100% Less: Cost of Goods sold 4590000 62.45% 3509500 62.83% Gross margin 2760000 37.55% 2076500 37.17% Less: Selling expenses 1397000 19.01% 1082000 19.37% Administration expenses 708500 9.64% 617000 11.05% Total Expenses 2105500 28.65% 1699000 30.42% Net Operating Income 654500 8.90% 377500 6.76% Less: Interest Expense 105000 1.43% 86000 1.54% Net Income before taxes 549500 7.48% 291500 5.22%