Exercise: 15- 1 Common- Size Income Statement-

A Comparative Income Statement is given below for McKenzie Sales, Ltd, of Toronto:

MaKenzie Sales, Ltd.

Comparative Income Statement

This Year Last Year

Sales: $8,000,000 $6,000,000

COGS: 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: 2,192,000 1,710,000

Net Operating Income: 824,000 774,000

Interest Expense 96,000 84,000

Net Income before Taxes $728,000 $690,000

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

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