Question 1: Truman Enterprises is in the process of comparing its current financial performance for Year 3 with the prior two years. Truman experienced exceptionally strong growth between Years 1 and 2, with a slight decrease in sales between Years 2 and 3. Year 1 Year 2 Year 3 Net sales $4,560,000 $30,980,400 $26,583,220 Cost of goods sold 2,378,900 24,655,340 21,444,985 Selling expenses 490,000 1,289,466 2,099,800 General and administrative expenses 290,500 500,000 600,000 Which one of the following statements is correct when using common-size analysis to compare the results? a) Truman’s profitability increased each year due to more efficient production processes. b) Truman experienced the highest proportion of selling expenses in Year 2, which led to the high net sales. c) Truman increased the percentage of general and administrative expenses each year in order to manage the company’s growth. d) Truman’s proportion of gross profit was lowest in Year 3 due to high production costs.
Posted on: Tue, 20 Jan 2015 06:52:48 +0000