Apple and Google report the following income statement data (some are assumed). Use the companies’ service revenue and cost data to answer the requirements.

Required

1. Compute the gross profit ratio for each of the two years shown for each company.
2. Is the change in Apple’s current year gross profit ratio on its services favorable or unfavorable?
3. Is the change in Google’s current year gross profit ratio on its services favorable or unfavorable?
4. Does Google’s current year gross profit ratio underperform or outperform the industry (assumed) average of 60%?

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Apple Google $ millions Current Year Prior Year Current Year Prior Year Service revenue $46,291 $39,748 $134,811 $116,461 Cost of services.. 16,786 15,592 59,856 50,661