Answered

Welcome to Westonci.ca, where finding answers to your questions is made simple by our community of experts. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

Express the following comparative income statements in common-size percents. (Round your percentage answers to 1 decimal place.)

GOMEZ CORPORATION Comparative Income Statements For Years Ended December 31

Current Year Prior Year
Sales $740,000 $625,000
Cost of goods sold 560,300 290,800
Gross profit 179,700 334,200
Operating expenses 128,200 218,500
Net income $51,500 $115,700

Required:
Using the common-size percentages, which item is most responsible for the decline in net income?

Sagot :

Parrain

Answer: Cost of Goods sold

Explanation:

Common size analysis refers to making all entries in the income statement, a percentage of sales for that year.

Current Year                                                      Prior Year

Sales                                      100%                           100%

Cost of Goods sold               75.7%                          46.5%

Gross Profit                            24.3%                          53.5%

Operating expenses             17.3%                             35%

Net Income                              7.0%                            18.5%

Looking at the percentages above, one can see that the COGS increased the most from the previous year by going from 46.5% to 75.7% representing an increase of 29.2%.

This had the most impact on Net income as it substantially reduced Gross profit.

We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Keep exploring Westonci.ca for more insightful answers to your questions. We're here to help.