A comparative income statement is given below for McKenzie Sales, Ltd., of Toron

Question

A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto McKenzie Sales, Ltd Comparative Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: This Year Last Year $7,360,000 $5,593,600 06,000 2,760,000 2,087,600 4,600,000 3,5 Selling expenses Administrative expenses Total expenses Net operating income Interest expense Net income before taxes 1,380,000 712,000 2,092,000 668,000 98,000 1,077,500 613,000 1,690,500 397,100 87,000 $ 570,000 310,106o Members of the company's board of directors are surprised to see that net income increased by only $259,900 when sales increased by $1,766,400 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).)

Explanation / Answer

Income Statement 2011 % 2012 % Net Sales $7,360,000 100% $5,593,600 100% Cost of Goods Sold 4,600,000 63% 3,506,000 63% Gross Profit Margin $2,760,000 37% $2,087,600 37% Selling Expenses 1,380,000 19% 1,077,500 19% Administrative expenses 712,000 10% $613,000 11% Operating Profit (EBIT) $668,000 9% $397,100 7% Interest $98,000 1% $87,000 1.6% Earnings Before Taxes $570,000 8% $310,100 5.4%

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