15-1 Common Size Income Statements

Exercise 15-1 Common-Size Income Statement [LO1]

A comparative income statement is given below for Ryder Company:

Ryder Company

Comparative Income Statement

This Year Last Year

Sales $ 5,000,000 $ 4,000,000

Cost of goods sold 3,160,000 2,400,000

Gross margin

1,840,000

1,600,000

Selling and administrative expenses:

Selling expenses 900,000 700,000

Administrative expenses 680,000 584,000

Total selling and administrative expenses 1,580,000 1,284,000

Net operating income 260,000 316,000

Interest expense 70,000 40,000

Net income before taxes $

190,000

$

276,000

The president is concerned that net income is down even though sales have increased during the year. The president is also concerned that administrative expenses have increased because the company made a concerted effort to cut waste out of the organization.

Required:

1.

Express each year's income statement in common-size percentages. (Input all amounts as positive values. Round your answers to 1 decimal place. Omit the "%" sign in your response.)

This Year Last Year

Sales 100.0 correct % 100.0 correct %

Cost of goods sold 63.2 correct % 60.0 correct %

Gross margin 36.8 correct % 40.0 correct %

Selling and administrative expenses:

Selling expenses 18.0 correct % 17.5 correct %

Administrative expenses 13.6 correct % 14.6 correct %

Total selling and administrative expenses 31.6 correct % 32.1 correct %

Net operating income 5.2 correct % 7.9 correct %

Interest expense 1.4 correct % 1.0 correct %

Net income before taxes 3.8 correct % 6.9 correct %