During the current year, Norlander Inc. implemented an inventory management system that it believes will result in greater efficiencies and profits. Norlander's CEO was therefore disappointed when he saw the following condensed income statement showing no increase in net income:

Required
Using horizontal and vertical analyses, provide reasoning to the CEO that the inventory management system was effective. Round percentages to one decimal point (i.e., 4.8%).

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2012 650,000 $775,000 372,500 451,800 232,500 278,200 2011 Sales Cost of goods sold Operating expenses Net income 45,000 45,000