7. The following financial statement items are shown for J&T Manufacturing Net sales Cost of goods sold Insurance expense Total operating expenses Net Income $840,000 360,000 28.000 120,000 56,000 Calculate the common-size percentage for insurance expense. a. 3.3% b. 5.8% c. 23.3% d. 50.0% 8. Investigating liquidity is important because a. if a company cannot pay its bills on time, it will have difficulty obtaining resources needed to continue operating- b. a company needs the ability to buy long-term assets. c. a company's price earnings ratio will decline. d. GAAP requires that assets must exceed liabilities. 9. The income statement for Otto Construction Company appears below: Net sales (all credit sales) Cost of goods sold Gross margin Operating expenses Interest expense Income before taxes Income tax Net income $180,000 100.000 80,000 30,000 12,000 38,000 ___9.500 $ 28,500 Average total assets total $240,000. Otto's income tax rate is 25%. What is the gross margin percentage? a. 12.5% b. 15.8% C. 35.6% d. 44.4% 10. If the activity level decreases, what happens to the total variable cost? a. It decreases. b. It increases C. It remains the same. d. It depends on how much the activity level increases