Common-Sized Income Statements

Kellogg Company (K) produces, markets, and distributes cereal and food products including Cheez-It, Coco Pops, Rice Krispies, and Pringles. The following partial income statements (in millions) were adapted from recent financial statements.

	Year 1				Year 2
Sales		$13,014				$12,923
Cost of goods sold		(8,259)				(7,901)
Gross profit		$ 4,755				$ 5,022
Selling and administrative expenses		(3,360)				(3,076)
Operating income		$ 1,395				$ 1,946

Question Content Area

1. Prepare common-sized income statements for Years 1 and 2. Round your answers to one decimal place.

Kellogg Company Common-Sized Income Statement Year 1 and 2

blank	Year 1	Year 2	Increase (Decrease)
Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Operating income

Question Content Area

2. What is the primary cause of the decrease in operating income in Year 2?