Below Is a Comparative Income Statement for Melissa Company: Melissa

question 82

Multiple Choice

Below is a comparative income statement for Melissa Company: Melissa Company
Income Statement
For the Years Ended December 31,20X6 and 20X5
$\begin{array}{lrr}&20X6&20X5\\\text { Sales } & \$ 1,744 & \$ 1,562 \\\text { Less: Cost of goods sold } & 992 & 806 \\\text { Gross profit } & \$ 752 & \$ 756 \\\text { Less operating expenses: }\\\text { Wage expense } & \$ 172 & \$ 160 \\\text { Depreciation expense } & 28 & 26 \\\text { Rent expense } & 36 & 36 \\\text { Miscellaneous expense } & 40 & 70 \\\text { Total operating expenses } & \$ 276 & \$ 292\\\text { Operating income } & \$ 476 & \$ 464 \\\text { Less other expenses: } & & \\\quad \text { Interest } & 20 & 60\\\text { Income before tax } & \$ 456 & \$ 404 \\\text { Less: Income tax expense } & 182 & 162 \\\text { Net income } & \$ 274 & \$ 242\end{array}$ If a common-size income statement were prepared, _____ would be attributable to the 20X5 wage expense of Melissa Company.

• A)10.2%
• B)9.8%
• C)66.1%
• D)34.4%

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Definitions:

Business Failure

The cessation of operations and the inability of a company to continue financial performance due to various factors such as poor management or market conditions.

Receivership

A legal process in which a court appoints a receiver to manage the assets and business operations of a company that is in financial distress.

Pharmaceutical Company

A business entity focused on the research, development, production, and marketing of medications and medical treatments.

Product Innovation

The introduction of new or significantly improved goods or services in terms of their capabilities, components, or uses.