Harrington Collection Financial Results Year Ending December 30 $ in millions 2005 2006 2007 Sales $556 $834 1,390 $542 $813 $1,354 $538 5806 $1,344 $372 $366 $366 $375 $369 $371 $747 $735 $737 $183 $172 Manufacturing Retatil Total Revenue Costs of Goods Sold Manufacturing Retail Total COGS Gross profit Manufacturing Retail Total Gross Profit SG&A Manufacturing Retail Total SG&A Profit Before Tax Manufacturing Retail Total Profit Before Tax $459 $643 $176 $443 $620 $435 $607 $108 $106 $383 $113 $379 $379 $489 $487 $490 $68 $59 $78 $76 $154 $65 $58 $133 $118 1. Please calculate the profit margin using 'profit before tax' data for the year 2007 for Harrington's Manufacturing division. Calculate and compare the same data for the Retail division. Based on your calculation which division is more profitable? a) Manufacturing division is more profitable than Retail division b) Both are equally profitable c) There is insufficient data to answer the question d) Retail division is more profitable than Manufacturing division 2. What is the reason for the difference in profitability of each division? To figure this out please calculate the proportion of sales dollar that goes towards expenses for Manufacturing and Retail divisions for 2007. (Hint- Calculate ratio of COGS/Sales and SGA/Sales.) a) There is insufficient data to answer the question b) Manufacturing division has the same SGA/sales ratio as Retailing c) Manufacturing division has higher SGA/Sales ratio than Retailing d) Manufacturing division has lower SGA/Sales ratio than Retail division. 3. Please calculate profit margin for Harrington for 2005, 2006 and 2007. What trend do you notice? a) There is no change in profit margins over time. b) There is insufficient data to answer the question. c) Harrington is experiencing increasing profit margins over time. d) Harrington is experiencing deteriorating profit margins over time