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ES CASE STUDY 1.3 ANALYSIS OF PROFIT AND Loss STATEMENTS singbo hy? Explom ecisions Ms. Kane, the china and glass buyer of Crystal Clear, Inc. was asked to presenta yearly profit and loss statement in skeletal form to the divisional merchandise man ager. In addition, she wanted to prepare a summary of comments that included a comparison of her performance this year with that of her major competitor, China Seas. Lid. Ms. Kane obtained the following information from Crystal Clear's statisti cal department Gross sales $135,000 Alteration and workroom costs $1,000 Opening inventory at cost Closing inventory at cost $61,000 New purchases at cost 577,500 Inward freight $1.500 Cash discounts 4% General overhead $11.000 Advertising $9,000 Salaries $20,000 Rent $8,600 Customer returns and allowances $15.000 Ms. Kane obtained from outside research, profit and loss data on her competitor, China Seas, which had the following results for the same year: Profit 6% or $7,350 Operating expenses 40% Ms. Kane then prepared a skeletal profit and loss statement for her department and for that of her competitor, China Seas. On completion of this task, she compared the two statements. Based on this study, where and how did Ms. Kane determine that she could take action that would give immediate results and have an impact on the department's profitability Support the suggested action mathematically. CASE STUDY 13 ANALYSIS OF PROFIT AND LOSS STATEMENTS 49