In its income statement for the year ended June 30, 2007, The Clorox Company reported the following condensed data (dollars in millions).

Instructions
(a) Prepare a multiple-step income statement.
(b) Calculate the gross profit rate and the profit margin ratio and explain what each means.
(c) Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 35%, and round all amounts to wholedollars.)

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Selling and Research and development expense Income tax expense Other expense Cost of goods sold 108 247 Net sales Interest expense Advertising expense administrative expenses 642 4,847 113 474 2,756