Suppose in its income statement for the year ended June 30, 2017, The Clorox Company reported the following condensed data (dollars in millions).

Salaries and wages expense $ 460 Research and Depreciation expense 90 development expense $ 114 Sales revenue 5,730 Income tax expense 276 Interest expense 161 Loss on disposal of plant assets 46 Advertising expense 499 Cost of goods sold 3,104 Sales returns and Rent expense 105 allowances 280 Utilities expense 60 Instructions

(a) Prepare a multiple-step income statement.

(b) Calculate the gross profi t rate and the profi t margin and explain what each means.

(c) Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. (Hint: Increase both sales revenue and sales returns and allowances by 25%.) Redo parts

(a) and

(b) and discuss whether this plan has merit.

(Assume a tax rate of 34%, and round all amounts to whole dollars.)