Following are income statements for Hossa Corporation for 2017 and 2016. Percentage of sales amounts are also shown for each operating expense item. Hossa’s income tax rate was 38% in 2016 and 40% in 2017. How do you calculate the cause of change analysis past sales? 20162017($ in millions)$ in millions$ 5,500(2,475)(825)2,200(836)$ 1,364$ in millions$ 6,500(3,055)(1,040)2,405(962)$ 1,443* of sales* of salesSalesCost of sales45%478Other operating expenses15%168Operating incomeProvision for income taxesNet incomeIncome tax rate38840% Causes of change in net incomeNet income – 2016$ 1,364.0Effect of increase in sales248.0Effect of increase in COGSEffect of increase in OPEXEffect of increase in tax rateIncrease in net income248.0Net income - 2017$ 1,443.0

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Following are income statements for Hossa Corporation for 2017 and 2016. Percentage of sales amounts are also shown for each operating expense item. Hossa’s income tax rate was 38% in 2016 and 40% in 2017. How do you calculate the cause of change analysis past sales?

Following are income statements for Hossa Corporation for 2017 and 2016. Percentage of sales amounts are also shown for each operating expense item. Hossa’s income tax rate was 38% in 2016 and 40% in 2017. How do you calculate the cause of change analysis past sales?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter4: Profitability Analysis

Section: Chapter Questions

Problem 23PC

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Question

How do you calculate the cause of change analysis past sales?

2016
2017
($ in millions)
$ in millions
$ 5,500
(2,475)
(825)
2,200
(836)
$ 1,364
$ in millions
$ 6,500
(3,055)
(1,040)
2,405
(962)
$ 1,443
* of sales
* of sales
Sales
Cost of sales
45%
478
Other operating expenses
15%
168
Operating income
Provision for income taxes
Net income
Income tax rate
388
40%

Causes of change in net income
Net income – 2016
$ 1,364.0
Effect of increase in sales
248.0
Effect of increase in COGS
Effect of increase in OPEX
Effect of increase in tax rate
Increase in net income
248.0
Net income - 2017
$ 1,443.0

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