ED-15 Performing horizontal anaylysis- income statement Data for McCormick Deisn

Question

ED-15 Performing horizontal anaylysis- income statement

Data for McCormick Deisngs, Inc. follow:

Income Statement

Requirements:

1. Prepard a horizontal analysis of the comparative income statement of McCormick Designs, Inc. Round percentage changes to one decimal place.

2. Why did 2016 net income increase by a higher percentage than net sales revenue?

*hint: 1. Net income 35.7%

Please list the step by step process, thank you!

2016 2015 Net Sales Revenue $431,250 $373.000 Expenses: Cost of Goods Sold 202,000 189,000 Selling and Administrative Expenses 100,050 92,550 Other Expenses 8,000 2,150 Total Expenses 310,050 283,700 Net Income $121,200 $89,300

Explanation / Answer

B))This is so because the expenses are increase at a rate lower than the increase rate of sales.

change during two years % change =change /previous year figures Net sales revenue 58250    [431250-373000] 58250/373000 = .156 or 15.6% Less:expenses cost of goods sold 202000-189000=13000 13000/189000 = 6.9% selling 100050-92550=7500 7500/92550= 8.1% Other expense 8000 - 2150=5850 5850/2150 = 272.09% Total expense 26350 26350 /283700 = 9.3% Net income 121200-89300= 31900 31900/89300= 35.7%

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