Exercise 14.3 (Algo) Common Size Income Statements (LO14-1)

		Year 2				Year 1
Sales	$	471,000			$	396,000
Cost of goods sold		330,000				268,000
Gross profit	$	141,000			$	128,000
Operating expenses		130,000				116,000
Net income	$	11,000			$	12,000

a. Prepare common size income statements for Price Company, a sole proprietorship, for the two years shown as above by converting the dollar amounts into percentages. For each year, sales will appear as 100 percent and other items will be expressed as a percentage of sales. (Income taxes are not involved as the business is not incorporated.)

b. State whether the changes from year 1 to year 2 are favorable or unfavorable.