Chapter 20, Problem 2AA

Apple and Google work to maintain high-quality and low-cost operations. One ratio routinely computed for this assessment is the cost of goods sold divided by total expenses. A decline in this ratio can mean that the company is spending too much on selling and administrative activities. An increase in this ratio beyond a reasonable level can mean that the company is not spending enough on selling activities. (Assume for this analysis that total expenses equal the cost of goods sold plus total operating expenses.)

Required

1. For Apple and Google, refer to Appendix A and compute the ratios of cost of goods sold to total expenses for fiscal years 2017 and 2016. (Record answers as percents, rounded to one decimal.)

2. Based on answers to part 1, which company had a greater percentage reduction in selling and administrative expenses in 2017?