A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto:

Members of the company’s board of directors are surprised to see that net income increased by only $38,000 when sales increased by two million dollars.

Required:

1. Express each year’s income statement in common-size percentages. Carry computations to one decimal place.
2. Comment briefly on the changes between the two years.

Transcribed Image Text:

McKenzie Sales, Ltd. Comparative Income Statement Last Year This Year S6,000,000 Sales S8,000,000 Cost of goods sold 4,984,000 3,516,000 Gross margin 3,016,000 2,484,000 Selling and administrative expenses: Selling expenses 1,480,000 1,092,000 Administrative expenses 712,000 618,000 Total expenses 1,710,000 2,192,000 Net operating income 824,000 774,000 Interest expense 96,000 84,000 S 728.000 S 690,000 Net income before taxes