Marta Enterprise is a large corporation that had business activities in such areas as building, maintenance services, real-estate investment, and truck leasing and auto parts distribution. The following selected data was obtained from the company’s comparative income statements and statements of financial position.
Income Statements Data For the Year ended |
||
31/12/ YEAR 2 |
31/12/YEAR 1 |
|
Ksh. ‘000’ |
Kshs. ‘000’ |
|
Net sales |
97,000 |
82,000 |
Cost of goods sold |
57,500 |
47,500 |
Selling expenses |
14,000 |
12,000 |
Administrative expenses |
16,500 |
15,000 |
Interest expense on long-term debt |
1,500 |
2,100 |
Statement of Financial Position |
||
31/12/ YEAR 2 |
31/12/YEAR 1 |
|
Ksh. ‘000’ |
Ksh. ‘000’ |
|
Cash |
127,000 |
119,500 |
Short-term investments |
52,500 |
68,000 |
Inventories |
18,000 |
14,000 |
Pre-paid expenses |
79,000 |
65,500 |
Total current liabilities |
3,500 |
5,000 |
Long-term debt |
112,000 |
107,500 |
15,000 |
21,500 |
At the beginning of year 2, top management implemented a firm-wide cost control program aimed at selling and administrative expenses. The company rounds all computations to one decimal place and has no cash sales.
Required:
Answer- a)- Year 2 percentage increase in selling expenses over the amounts incurred in year 1 = 16.7%.
Year 2 percentage increase in administrative expenses over the amounts incurred in year 1 = 10%.
Explanation- Year 2 percentage increase in selling expenses over the amounts incurred in year 1= ({$14000-$12000)/12000}*100
= ($2000/$12000)*100
= 16.7%
Year 2 percentage increase in administrative expenses over the amounts incurred in year 1= {$16500 -$15000)/$15000}*100
= ($1500/$15000)*100
= 10%
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