Please help me. Thankyou. Following are income statements for Hossa Corporation for 20X1 and 20X2. Percentage of sales amounts are also shown for eachoperating expense item. Hossa's income tax rate was 22% in 20X1 and 24% in 20X2.($ in millions)SalesCost of salesOther operating expensesOperating incomeProvision for income taxesNet incomeIncome tax rate20X1s in millions$5,500.0(2,475.0)(825.0)2,200.0(484.0)$1,716.022%% of sales45%15%Hossa's management was pleased that 20X2 net income was up 6.5% from the prior year. Although you are also happy with theincrease in net income, you are not so sure the news is all positive. You have modeled Hossa's income as follows:Cause-of-Change Analysis($ in millions)Net income-20X1Effect of increase in salesEffect of increase in COGSEffect of increase in OPEXEffect of increase in tax rateIncrease in net incomeNet income-20X220x2$ in millions % of sales$6,500.0(3,055.0)(1,040.0)2,405.0(577.2)$ 1,827.824%NET INCOME = SALES (1-COGS%-OPEX%) x (1 - TAX RATE)Using this model, net income in 20X1 is computed as $5,500 x (1 - 45 % - 15 % ) x ( 1 - 2 2 %) = $ 1,716.0. Net income in 20X2 is computedas $6,500 × (1-47% -16%) (1 - 24 %) = $1,827.8.Required:• Increase in sales (SALES)• Increase in cost of sales as a percent of sales (COGS%)1. Prepare a cause-of-change analysis to show the extent to which each of the following items contributed to the $111.8 millionincrease in Hossa's net income from 20X1 to 20x2: (Do not round intermediate calculations. Enter your answers in millionsrounded to 1 decimal place. Negative amounts should be indicated by a minus sign.)47%16%Increase in other operating expenses as a percent of sales (OPEX%)• Increase in income tax rate (TAX RATE)

Calculation of Effect of increase in sales=1000X(1-(45%)-(15%)X(1-22%))312

Following are income statements for Hossa Corporation for 20X1 and 20X2. Percentage of sales amounts are also shown for each operating expense item. Hossa's income tax rate was 22% in 20X1 and 24% in 20X2. ($ in millions) Sales Cost of sales Other operating expenses Operating income Provision for income taxes Net income Income tax rate 20X1 $ in millions % of sales $5,500.0 (2,475.0) (825.0) 2,200.0 (484.0) $1,716.0 22% 45% 15% 20X2 $ in millions $ 6,500.0 (3,055.0) (1,040.0) 2,405.0 (577.2) $1,827.8 • Increase in sales (SALES) • Increase in cost of sales as a percent of sales (COGS%) • Increase in other operating expenses as a percent of sales (OPEX%) Increase in income tax rate (TAX RATE) 24% % of sales 47% 16% Hossa's management was pleased that 20X2 net income was up 6.5% from the prior year. Although you are also happy with the increase in net income, you are not so sure the news is all positive. You have modeled Hossa's income as follows: NET INCOME = SALES *(1-COGS%-OPEX %) x (1- TAX RATE) Using this model, net income in 20X1 is computed as $5,500 x (1-45%-15% ) x (1 - 22 %) = $1,716.0. Net income in 20x2 is computed as $6,500 ×(1-47% -16%) x (1 - 24 %) = $1,827.8. Required: 1. Prepare a cause-of-change analysis to show the extent to which each of the following items contributed to the $111.8 million increase in Hossa's net income from 20x1 to 20x2: (Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place. Negative amounts should be indicated by a minus sign.)

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 19BEA