USING COMMON SIZE STATEMENTS
The following income statement and vertical analysis data are available for Willis Audio Products:
| Willis Audio Products Comparative Statements of Income |
|
|
Year Ended June 30,
|
|
2009
|
2008
|
2007
|
|
(in thousands)
|
Amount %
|
Amount %
|
Amount %
|
|
Sales
|
$4,122.0 100.0
|
$3,566.0 100.0
|
$2,965.0 100.0
|
|
Other income, net
|
39.7 1.0
|
36.7 1.0
|
21.3 0.7
|
|
Total revenues
|
$4,161.7 101.0
|
$3,602.7 101.0
|
$2,986.3 100.7
|
|
Costs and
|
|
|
|
|
expenses:
|
|
|
|
|
Cost of goods
|
|
|
|
|
sold
|
$1,893.6 45.9
|
$1,610.3 45.2
|
$1,310.8 44.2
|
|
Selling and
|
|
|
|
|
administrative
|
1,610.3 39.1
|
1,603.6 45.0
|
1,505.3 50.8
|
|
Interest
|
61.4 1.5
|
69.7 2.0
|
63.2 2.1
|
|
Total costs and
|
|
|
|
|
expenses
|
$3,565.3 86.5
|
$3,283.6 92.2
|
$2,879.3 97.1
|
|
Income before
|
|
|
|
|
income taxes
|
$ 596.4 14.5
|
$ 319.1 8.9
|
$ 107.0 3.6
|
|
Income taxes
|
|
|
|
|
expense
|
181.5 4.4
|
109.6 3.1
|
14.5 .5
|
|
Net income
|
$ 414.9 10.1
|
$ 209.5 5.9
|
$ 92.5 3.1
|
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 toincrease while the gross margin percentage decreases.