The following income statement and vertical analysis data are available for Colfer Audio Products:

Required:
1. Suggest why net income declined from $273,200 to $41,600 while the cost of goods sold percentage decreased each year and selling and administrative expenses remained nearly constant.
2. Determine what could cause sales to decline while the gross margin percentage increases.

Colfer Audio Products Consolidated Income Statements Year Ended June 30, 2010 2009 in thousands) Sales Other income, net Total revenues Costs and expenses: Amount Amount % Amount % $2,970.0 100.0 $3,465.0 100.0 $3,960.0 100.0 1.0 39.6 1.0 23.7 0.8 34.6 $2,993.7 100.8 $34996 101.0 $3,9996 101.0 $1,303.8 43.9 $1,566.2 45.2$1,920.6 48.5 Selling and odministrative 1,57 52.9 1,593.9 6.0 1,564.2 39.5 65.8 1.959.4 1.5 $2.937.398.9 $3,225.9 93.1 $3.544.2 89.5 Income before income taxes 56.4 1.9 $273.7 $ 7.9 $455.4 11.5 14.8 0.5 1074 3.1 182.2 4.6 $41.6 1.4 166.3 4.8 $273.2 6.9 Cost of goods sold Interest 62.4 2.1 Total costs and expenses Income taxes expanse Net income