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The following information was taken from the 2005 annual report of Hogar Products, Inc. The company manufactures a wide variety of household products.

Required A. How much did sales grow from 2003 to 2004 and from 2004 to 2005?

B. Restate each item on the income statement (except earnings per share) as a percent of net sales. [Hint: Sales always = 100%; 2005 cost of product sold = 68.5% 2,548 3,720).]

C. What have the changes in relative revenues and expenses had on operating income and net income over the three-year period?

D. What conclusions can you draw about the company’s operating leverage? Are most of its costs fixed or variable?