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

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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?


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