Reference no: EM132493339

Sales                                 $548,000                   $421,000

Cost of goods sold            330,000                       268,000

Gross profit                     $218,000                      $153,000

Operating expenses           130,000                     116,000

Net income                   $88,000                        $37,000

Question a. Prepare common size income statements for Price Company, a sole proprietorship, for the two years shown as above by converting the dollar amounts into percentages. For each year, sales will appear as 100 percent and other items will be expressed as a percentage of sales. (Income taxes are not involved as the business is not incorporated.)

Question b. State whether the changes from year 1 to year 2 are favorable or unfavorable.