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

Required:
1. Suggest why net income increased from $92,500 to $414,900 while the cost of goods sold percentage increased each year and selling and administrative expenses remained nearly constant.
2. Explain what could cause sales to increase while the gross margin percentagedecreases.

Transcribed Image Text:

Willis Audio Products Comparative Statements of Income 5 Year Ended June 30 2009 2008 2007 in thousands) Amount % Amount % Amount % Sales Other income, net $4,122.0 10.0 $3,566.0 100.0 $2,965.0 100.0 39.7 54,161.7 101.0 $3,6027 101.0,83 100.7 1.0 36.7 1.0 21.3 0.7 Total revenues Costs and expenses Cost of goods $1,893.6 45$1,610.3 45.2 $1,310.8 44.2 Selling and administrative 1,610.3 39,603.6 45.0 ,505.3 50.8 Interest Total costs and expenses Income before 63.2 2.1 $3,565.3 865 $3283.6 22 $2.879.3 971 $596.4 14.5 319.1 8.9 107.0 3.6 61.4 1.5 69.7 2.0 income taxes Income taxes 109.6 209.5 14.5 5.9 92.5 expense Net income $414.9 10.1