Comparative income statements of Spyres Manufacturing Company for Years 9 and 8 are reproduced
below:
|
Year 9 |
Year 8 |
|
|
Net sale |
$600,000 |
$500,000 |
|
Cost of goods sold |
490,000 |
430,000 |
|
Gross margin |
110,000 |
70,000 |
|
Operating expenses |
101,000 |
51,000 |
|
Income before taxes |
9,000 |
19,000 |
|
Income taxes |
2,400 |
5,000 |
|
Net income |
$ 6,600 |
$ 14,000 |
Required:
a. Prepare common size statements showing the percent of each item to net sales for both Year 8 and Year 9.
Include a column reporting the percentage increase or decrease for Year 9 relative to Year 8 (round numbers to
the tenth of 1%).
b. Interpret the trend shown in your percentage calculations of a. What areas identified from this analysis should
be a matter of managerial concern?