The following income statement and vertical analysis data are available for Robbins 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 percentageincreases.

Robbins Audio Products Comparative Statements of Income Year Ended June 30, 2008 2009 2007 (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 $2,993.7 100.8 $3,499.6 101.0 $3,999.6 101.0 34.6 1.0 39.6 Cost of goods sold $1,303.8 43.9 $1,566.2 45.2 $1,920.6 48.5 Selling and administrative 1,571.1 52.9 1,593.9 46.0 1,564.2 39.5 1.5 Interest 62.4 2.1 65.8 59.4 Year Ended June 30, 2009 2008 in thousandS Amount % Amount % Amount % Total costs and expenses $2937.3 98.2 $3,225.2 931 $3,544.2 89.5 Income before income taxes 56.4 9 273.7 7.9 455.4 11.5 Income taxes expense Net income 182.2 4.6 273.2 6.9 14.8 0.5 107.4 $ 41.6 1.4 166.3 4.8