Presented are the income statements of Haley and Johnston Publications companies for the current year: $\begin{array}{|l|l|l|l|l|}
\hline & \text { Haley } & & \text { Johnston } & \
\hline \text { Net sales revenue } & \$ 487,000 & 100.00 \% & \$ 500,000 & 100.00 \% \
\hline \text { COGS } & 400,000 & 82.14 \% & 395,000 & 79.00 \% \
\hline \text { Gross Profit } & 87,000 & 17.86 \% & 105,000 & 21.00 \% \
\hline \text { Selling/Gen Expenses } & \underline{30,000} & 6.16 \% & 50,000 & 10.00 \% \
\hline \text { Income from operations } & 57,000 & 11.70 \% & 55,000 & 11.00 \% \
\hline \text { Income tax expense } & 17,100 & 3.51 \% & 16,500 & 3.30 \% \
\hline \text { Net Income } & \$ 39,900 & 8.19 \% & \$ 38,500 & 7.70 \% \
\hline
\end{array}$

-Which company has the better relationship between gross profit and net sales revenue?
A)Impossible to determine
B)Both have the same relationship
C)Johnston
D)Haley

Question

Presented are the income statements of Haley and Johnston Publications companies for the current year: $\begin{array}{|l|l|l|l|l|}
\hline & \text { Haley } & & \text { Johnston } & \
\hline \text { Net sales revenue } & \$ 487,000 & 100.00 \% & \$ 500,000 & 100.00 \% \
\hline \text { COGS } & 400,000 & 82.14 \% & 395,000 & 79.00 \% \
\hline \text { Gross Profit } & 87,000 & 17.86 \% & 105,000 & 21.00 \% \
\hline \text { Selling/Gen Expenses } & \underline{30,000} & 6.16 \% & 50,000 & 10.00 \% \
\hline \text { Income from operations } & 57,000 & 11.70 \% & 55,000 & 11.00 \% \
\hline \text { Income tax expense } & 17,100 & 3.51 \% & 16,500 & 3.30 \% \
\hline \text { Net Income } & \$ 39,900 & 8.19 \% & \$ 38,500 & 7.70 \% \
\hline
\end{array}$
 
-Which company has the better relationship between gross profit and net sales revenue?
A)Impossible to determine
B)Both have the same relationship
C)Johnston
D)Haley

Quizplus · Accepted Answer

To determine the relationship between gross profit and net sales revenue, we look at the gross profit margin, which is calculated by dividing gross profit by net sales revenue. Johnston has a gross profit of $3,500,000 and net sales revenue of $7,000,000, giving it a gross profit margin of 0.5 or 50%. Haley has a gross profit of $2,500,000 and net sales revenue of $10,000,000, giving it a gross profit margin of 0.25 or 25%. Therefore, Johnston has the better relationship between gross profit and net sales revenue.

Presented Are the Income Statements of Haley and Johnston Publications