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biokam biokam
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A month ago
Penny Saver Inc. and Buy 4 Less Stores are both discount retailers. As their adapted income statements (in $ millions) for 2021 show, Penny Saver sales revenue and net income were more than three times those amounts of Buy 4 Less.

​​Penny SaverBuy 4 Less
Sales$4,644.9$1,302.9
Cost of goods sold  3,052.7     791.0
Gross profit1,592.2511.9
Selling, general & administrative expenses  1,226.4     498.9
Net operating income365.813.0
Other expense         6.7           .4
Income before taxes359.112.6
Income tax expense     129.6         4.1
Net income$   229.5$       8.5

Required:

a.Prepare a common-size income statement for each company. Express all percentages
using one decimal place. Your answers may not add perfectly due to rounding.
b.Which company did the better job of managing expenses? How did you reach your
conclusion?
Textbook 
Managerial Accounting

Managerial Accounting


Edition: 4th
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mooltipasmooltipas
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A month ago
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a.

​​Penny SaverBuy 4 Less
Sales100.0%100.0%
Cost of goods sold  65.7%  60.7%
Gross profit34.3%39.3%
Selling, general & administrative expenses  26.4%  38.3%
Net operating income7.9%1.0%
Other expense    0.1%    0.0%
Income before taxes7.7%1.0%
Income tax expense    2.8%    0.3%
Net income    4.9%    0.7%

b.Buy 4 Less is better at managing cost of goods sold, while Penny Saver is better at
managing the cost of selling, general & administrative expenses. Penny Saver manages expenses better overall with 4.9% of every sales dollar resulting in net income, as opposed to 0.7% for Buy 4 Less.
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