Reference no: EM133190162

Question - Suppose in its income statement for the year ended June 30, 2022, The Clorox Company reported the following condensed data (dollars in millions).

Salaries and wages expenses	$460	Research and development expense	$114
Depreciation expense	90	Income tax expense	328
Sales revenue	5,230	Loss on disposal of plant assets	46
Interest expense	161	Cost of goods sold	2,500
Advertising expense	499	Rent expense	105
Sales returns and allowances	230	Utilities expense	60

Assume a tax rate of 34%.

Required -

(a) Create a multiple-step income statement.

(b) Calculate the gross profit rate and the profit margin.

(c1) Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. (Hint: Increase both sales revenue and sales returns and allowances by 25%.) Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 34%, and round all amounts to whole dollars.) Make a multiple-step income statement.

(c2) Calculate the gross profit rate and the profit margin.