Common-Size Income Statement [LO1]

A comparative income statement is given below for Ryder Company:

Ryder Company Comparative Income Statement This Year Last Year Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,000,000 $4,000,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 3,160,000 2,400,000 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,840,000 1,600,000 Selling and administrative expenses:
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . 900,000 700,000 Administrative expenses . . . . . . . . . . . . . . . . . 680,000 584,000 Total selling and administrative expenses . . . . . 1,580,000 1,284,000 Net operating income . . . . . . . . . . . . . . . . . . . . . 260,000 316,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 40,000 Net income before taxes . . . . . . . . . . . . . . . . . . . $ 190,000 $ 276,000 The president is concerned that net income is down even though sales have increased during the year. The president is also concerned that administrative expenses have increased because the company made a concerted effort to cut waste out of the organization.
Required:
1. Express each year’s income statement in common-size percentages. Carry computations to one decimal place.
2. Comment briefly on the changes between the two years.