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:
. 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.
. Explain what could cause sales to increase while the gross margin percentage decreases.