Suppose in its income statement for the year ended June 30, 2014, 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 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 34%, and round all amounts to wholedollars.)

Transcribed Image Text:

Salaries and wages expense 460 Research and Depreciation expense Sales revenue Interest expense Advertising expense Sales returns and S 114 276 161 Loss on disposal of plant assets 46 3,104 105 60 90 development expense Income tax expense 5,730 499 280 Cost of goods sold Rent expense Utilities expense allowances