Reference no: EM132583957

Sales                               $523,000                  $399,000

Cost of goods sold              330,000                  268,000

Gross profit                              $193,000           $131,000

Operating expenses                     130,000             116,000

Net income                                 $63,000           $15,000

a. Build common size income statements for Price Company, a sole proprietorship, for the two years shown as above by converting the dollar amounts into percentages. For each year, sales will appear as 100 percent and other items will be expressed as a percentage of sales. (Income taxes are not involved as the business is not incorporated.)

b. State whether the changes from year 1 to year 2 are favorable or unfavorable.

Question 1: Prepare common size income statements for Price Company, a sole proprietorship, for the two years shown as above by converting the dollar amounts into percentages. For each year, sales will appear as 100 percent and other items will be expressed as a percentage of sales. (Income taxes are not involved as the business is not incorporated.) (Round your percentage value answers to 2 decimal places. i.e. 0.1234 as 12.34%.)