Question

Question 3 [5 points] The following financial statements are for Benson Inc. Benson Inc Income Statement For Years Ended December 31, 2014, 2013, and 2012 2014 2013 Sales 1,013,800 687,500 Cost of goods sold 601,400 578.000 Gross pront from sales 412,200 309,000 Operating expenses 105,700 113,800 Operating income 306,500 195,000 Interest expenso 8.850 9.650 Income before taxes 207,650 186,150 Income taxes 20.000 18.800 Net income 277.050 107,350 2012 33,600 63,300 170,300 119.100 51200 9.150 42,050 16,800 25,250 Benson Inc. Balance Sheet December 31, 2014, 2013 and 2012 Assets 2014 2013 Cash 79,500 $4,500 Short-term investments 65,000 79.000 Accounts receivable 46,300 $1,500 Merchandise inventory 46,400 52.700 Prepaid expenses 6,700 7.800 Notes receivable, due in 2018 7.500 7.000 Property, plant and equipment, net 200,000 305.000 Total assets 519.400 587.500 Liabilities and Equity Accounts payable 18,700 18.800 Salaries payable 13,500 12.000 Property taxes payable 13,950 16.800 Long-term note payable 64,000 73.000 Share capital 300,000 290.000 Retained earnings 109.250 176.900 Total liabilities and equity 519,400 587.500 2012 $9,300 81.000 47,200 63,800 9.000 6,000 339,000 635,000 22.400 10.800 14,850 82.000 270.000 235,850 635.900 Compute the gross margin below, and indicate whether the change from year to year is favourable or unfavourable. For your analysis, assume that all other things have remained constant. Apply your analysis in very general terms. All values should be accurate to at least two decimal places. 2014 2013 Analysis Gross margin (select one)

Answer 1

From the above information provided, Benson Inc, gross margin ratio for 2014 and 2013.

1 Benson Inc 3 Ratio 2014 2013 4 Gross margin 40.67 34.88 5 6 From 2013 to 2014, there is increase in gross margin ratio which is favourable. 1013600 887600 601400 578000 309600 412200 8 Workings 9 Sales 10 Less:Cost of goods sold 11 Gross profit 12 13 Gross margin: 14 Gross profit Sales 412200 309600 887600 15 1013600 40.67 16 34.88 17 18