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Express the following comparative income statements in common-size percents.
Using the common-size percentages, which item is most responsible for the decline in net income?
Income Statement Reason for
Decline in Net Income
GOMEZ CORPORATION
Comparative Income Statements
For Years Ended December 31
Current Year Prior Year %
Sales 770,000 $635,000
Cost of goods sold 568,100 284,400
Gross profit 201,900 350,600
Operating expenses 129,200 262,400
Net income 72,700 88,200
Using the common-size percentages, which item is most responsible for the decline in net income?

Respuesta :

anthougo

Answer:

Gomez Corporation

Using the common-size percentages, the item that is most responsible for the decline in net income in the current year when compared with the prior year is:

Cost of goods sold.  It increased to 74% from 45% in prior year, an increase of about 100%.

Explanation:

a) Data and Calculations:

GOMEZ CORPORATION

Comparative Income Statements

For Years Ended December 31

                               Current Year  %         Prior Year      %

Sales                           770,000    100%     $635,000   100%

Cost of goods sold    568,100      74%        284,400    45%

Gross profit                201,900      26%       350,600    55%

Operating expenses 129,200       17%       262,400     41%

Net income                  72,700       9%          88,200     14%

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