Exercise #2 [11 ts} 1. Read case "Nordstrom unveils plan for revamping (Case 3.2 in the reading named income statement, p.991." Look at the page numbers in the middle on the side. Assume that Nordstrom achieved the goals laid out by the president. Create an income statement for Nordstrom from the information given in the case. '30 29% overhead and expenses given in the case should be broken down as 11% procurement costs and 18% overhead/expenses for the income statement. $5.5 billion ($5,500,000.000) Net Sales 35% Gross margin 11% Procurement costs 18% Overhead/expenses Using the formulas, complete the income statement. (3pts) Nordstrom 2000 S 96 Gross Sales Customer Returns 81. Allowances Net Sales Cost of Goods Sold Gross Margin Procurement Costs Adjusted Gross Margin Overhead] Expenses Operating Profit Other Income] Expense Net Prot Before Taxes 2. In 2003 Nordstrom had net sales of $5.975 billion ($5,975,000,000), gross margin of $2.1 billion, operating profit of $189,736,000, and procurement costs remained at 11%. Create an income statement for 2003. (Always set up the frame work for the income statement first) (Spts) Did the rm achieve its goals for percentages of overhead/expenses and gross margin set in 2000? (1pt) e Goal: 35% Gross margin, 18% Overheadlexpenses 3. Create two income statements for Nordstrom, one for 2000 [you can use the one you created for #1] and one for 2007, using the model in Exercise 1, #2 and3. [use 11.00% of the 26.9% overhead and expenses as procurement costs and the remainder as overhead and expense] {3pts} On December 8. 2000. Nordstrom an- nounced it was shaking up its business. Decisions on new Store openings at three proposed sites were reexamined and can- celed.With $5.5 billion in sales. the com- pany decided to be less dealoriented with developers and more selective in choosing locations. The company chose to shrink certain back ofce operations and reduce expenses, including those bloated by an abundance of purchasing agents and con- sultants and excesses in the areas of travel, energy. and computer purchasing. On the other hand. millions were al- located for new technology. including merchandising systems. so buyers and sales associates could be on top of the hot items and inventory ow. The legendary sales force was rewarded with compensations built on base salaries and increased com- missions to boost morale and productiv ity. And this was just part of the agenda designed to sweep through the Seattle based specialty chain that is commonly called a department store. The company's president. Blake Nord- strom. told analysts the outlook for same-store growth was conservative, projected at l to 3% for the next 3 years. He also saw overhead and expenses at 29%, and gross margins at 359.3. \"These are not aggressive goals. but goals we need and must reach." So what has happened to Nordstrom since this declaration? It has opened 3 to 10 new stores a year. Sales went from $5.5 bil- lion in 2000 to $8.8 billion in 2007. Same store sales growth reached 8.5% in 2004 but dropped to 3.9% in 2007. Overhead and expenses dropped to 26.9% in 2007. Gross margin increased steadily to 37.6% in 2007. *Nordstrom.com.retrei\\ed Feb. 2001 and Dec. 2007