Year 2    Year 1  Sales $476,000   $412,000  Cost of goods sold  $330,000   $268,000  Gross profit $146,000   $144,000  Operating expenses  $130,000    $116,000  Net income $16,000   $28,000      What does a common size income statement look like for a sole proprietorship for the two years shown above? -converting the dollar amounts into percentages

   Year 2    Year 1 

Sales $476,000   $412,000 

Cost of goods sold  $330,000   $268,000 

Gross profit $146,000   $144,000 

Operating expenses  $130,000    $116,000 

Net income $16,000   $28,000 

What does a common size income statement look like for a sole proprietorship for the two years shown above? -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.)

Are the changes (sales and gross profit) from year 1 to year 2 favorable?