Suppose in its income statement for the year ended June 30, 2017, The Clorox Company reported the following condensed data (dollars in millions).

Instructions
(a) Prepare a multiple-step income statement.
(b) Calculate the gross profit rate and the profit margin and explain what each means.
(c) Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. (Hint: Increase both sales revenue and sales returns and allowances by 25%.) Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 34%, and round all amounts to whole dollars.)

Transcribed Image Text:

Salaries and wages expense 460 Research and Depreciation expense Sales revenue Interest expense Advertising expense Sales returns and allowances $ 114 276 161 Loss on disposal of plant assets 46 3,104 105 60 90 development expense 5,730 Income tax expense 499 Cost of goods sold Rent expense 280 Utilities expense