Question

We design and market Skechers-branded lifestyle footwear for men, women and children, and performance footwear for mean and women under the Skechers Go brand name.. As of February 15, 2015, we owned and operated 119 concept stores, 146 factory outlet stores and 98 warehouse outlet stores in the US and 51 concept stores, 33 factory outlet stores and three warehouse outlet stores internationally.

The popularity of Sketcher's products has increased significantly in recent years. Sales increased from $1,560.3 million in 2012 to $2,377.6 million in 2014, for an increase of 52.4 percent. In the same period, operating income increased from $22.3 million to $209.0 million, for an increase of 837 percent. It should be noted that this growth was not the result of larger acquisitions of or mergers with other companies.

Question: Write a memorandum that explains how a 52 percent increase in sales could cause an 837 percent increase in profits.

A. What was the accounting concept involved

B. How were the various types of cost incurred by Sketchers were likely affected by the increase in it's sales

C. The effect of the increase in sales on Sketchers' margin of safety

Answer 1

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