Homework Help is Here – Start Your Trial Now!
Business
Accounting
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.)

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.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Please help me. 

Thankyou. 

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 s in millions $5,500.0 (2,475.0) (825.0) 2,200.0 (484.0) $1,716.0 22% % of sales 45% 15% Hossa's management was pleased that 20X2 net income was up 6.5% from the prior year. Although you are also happy with the increase in net income, you are not so sure the news is all positive. You have modeled Hossa's income as follows: Cause-of-Change Analysis ($ in millions) Net income-20X1 Effect of increase in sales Effect of increase in COGS Effect of increase in OPEX Effect of increase in tax rate Increase in net income Net income-20X2 20x2 $ in millions % of sales $6,500.0 (3,055.0) (1,040.0) 2,405.0 (577.2) $ 1,827.8 24% 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 computed as $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 $111.8 million increase in Hossa's net income from 20X1 to 20x2: (Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place. Negative amounts should be indicated by a minus sign.) 47% 16% Increase in other operating expenses as a percent of sales (OPEX%) • Increase in income tax rate (TAX RATE)
Transcribed Image Text:Following are income statements for Hossa Corporation for 20X1 and 20X2. Percentage of sales amounts are also shown for each operating expense item. Hossa's income tax rate was 22% in 20X1 and 24% in 20X2. ($ in millions) Sales Cost of sales Other operating expenses Operating income Provision for income taxes Net income Income tax rate 20X1 s in millions $5,500.0 (2,475.0) (825.0) 2,200.0 (484.0) $1,716.0 22% % of sales 45% 15% Hossa's management was pleased that 20X2 net income was up 6.5% from the prior year. Although you are also happy with the increase in net income, you are not so sure the news is all positive. You have modeled Hossa's income as follows: Cause-of-Change Analysis ($ in millions) Net income-20X1 Effect of increase in sales Effect of increase in COGS Effect of increase in OPEX Effect of increase in tax rate Increase in net income Net income-20X2 20x2 $ in millions % of sales $6,500.0 (3,055.0) (1,040.0) 2,405.0 (577.2) $ 1,827.8 24% 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 computed as $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 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.) 47% 16% Increase in other operating expenses as a percent of sales (OPEX%) • Increase in income tax rate (TAX RATE)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Income Statement Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS