Using the Income Statement Below,develop a Common-Size Statement by Filling

question 126

Essay

Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.
$\begin{array}{lr}&20xx&20xx\\\text { Net sales } & \$ 200,000&\_\_\_ \\\text { Cost of goods sold } & 116,000&\_\_\_ \\\text { Gross margin } & \$ 84,000 &\_\_\_ \\\text { Operating expenses } & 46,000&\_\_\_ \\\text { Income before income taxes } & \$ 38,000&\_\_\_ \\\text { Income taxes expense } & 15,200&\_\_\_ \\\text { Net income }&\$22,800&\_\_\_ \\\end{array}$

Calculate contribution margin per unit, contribution margin ratio, and variable expense ratio.

Forecast net operating income based on changes in sales volume, selling price, variable costs, and fixed costs.

Calculate the margin of safety in dollars and percentage.

Apply changes in the business environment (e.g., sales incentives, price changes, advertising budget adjustments) to predict their effect on net operating income.

---

Definitions:

Equilibrium Price

Equilibrium price is the price at which the quantity of goods supplied is equal to the quantity of goods demanded, achieving a state of market balance.

Purely Competitive

Refers to a market configuration in which numerous companies offer the same products, with no single company having the power to affect the market's pricing.

Short-Run Equilibrium

A state in which market supply and demand balance out at a specific price level, usually considered within a timeframe where some factors are fixed.

Zero Economic Profits

A situation where a firm's total revenues exactly equal its total costs, leading to no net profit or loss after considering both explicit and implicit costs.