Question

A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto: McKenzie Sales, Ltd. Comparative Income Statement This Year Last Year Sales $ 7,400,000 $ 5,624,000 Cost of goods sold 4,750,000 3,513,500 Gross margin 2,650,000 2,110,500 Selling and administrative expenses: Selling expenses 1,392,000 1,079,000 Administrative expenses 704,500 608,500 Total expenses 2,096,500 1,687,500 Net operating income 553,500 423,000 Interest expense 101,000 87,000 Net income before taxes $ 452,500 $ 336,000 Members of the company’s board of directors are surprised to see that net income increased by only $116,500 when sales increased by $1,776,000. 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).)

Answer 1

Answer:

Explanation:

In a common - size income statement , the percentages are calculated using the sales value as the base figure

                          This Year                            Last year    

Sales                 7,400,000            100        5,624,000     100

Cost of Goods  4,750,000            64.2        3,513,500     62.5

Gross Margin    2,650,000           35.8         2,110,500     37.5

Selling Exp.       1,392,000            18.8          1,079,000     19.2

Admin. Exp.         704,500             9,5           608,500       10.8

Total Exp.           2,096,500          28.3          1,687,500     30.0

Net Op. Inc.          553,500            7.5              423,000     7.5

Interest Exp.          101,000             1.4                87,000      1.6

NIBT                       452,500           6.1                336,000    6.0