Wolverine World Wide Inc. prides itself as being the "world's leading marketer of U.S. branded non-athletic footwear." The following data (in millions) were taken from its annual report for the fiscal year ended

Wolverine World Wide Inc. prides itself as being the "world's leading marketer of U.S. branded non-athletic footwear." The following data (in millions) were taken from its annual report for the fiscal year ended January 3, 2009:

  

Sales of merchandise	$	1,305
Income taxes		37
Cash dividends paid		21
Selling and administrative expense		300
Cost of products sold		670
Interest expense		2
Other revenues		4

Requirement 1:

Based on these data, prepare a multistep income statement. (Input all amounts as positive values. Enter your answers in millions. Omit the "$" sign in your response.)

  

WOLVERINE WORLD WIDE INC. Income Statement For the Year Ended January 3, 2009
Net sales revenue	$
Cost of products sold
Gross profit
Selling and administrative expense
Income from operations
Other Revenues (Expenses):
Other revenues	$
Interest expense	()
Income before income tax expense
Income tax expense
Net income	$

Requirement 2:
(a)	How much was the gross profit? (Omit the "$" sign in your response.)

  

Gross profit

$

 
rev: 03-02-2011

Explanation:

Gross profit: $1,305 – $670 = $635.

(b)	What was the gross profit percentage? (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

  

Gross profit percentage

%

 
rev: 03-02-2011

Explanation:

Gross profit percentage: $635 ÷ $1,305 × 100%= 48.7%.

(c)	Which of the following(s) is true? (Select all that apply.)

 
rev: 03-02-2011

		The gross profit percentage is the average amount of gross profit earned on each dollar of net purchase.
		The gross profit is net sales revenue minus cost of goods sold.
		The gross profit percentage is the average amount of gross profit earned on each dollar of net sales.
		The gross profit is cost of goods sold minus net sales revenue.

Gross profit is the difference between the selling price and the cost of goods sold during the period. The gross profit percentage is the average amount of gross profit earned on each dollar of net sales. For this company, the rate was 48.7%, which means that the company earned nearly 49 cents of gross profit from each dollar of net sales.

  

Gross profit is the difference between the selling price and the cost of goods sold during the period. The gross profit percentage is the average amount of gross profit earned on each dollar of net sales. For this company, the rate was 48.7%, which means that the company earned nearly 49 cents of gross profit from each dollar of net sales.

  

Gross profit is the difference between the selling price and the cost of goods sold during the period. The gross profit percentage is the average amount of gross profit earned on each dollar of net sales. For this company, the rate was 48.7%, which means that the company earned nearly 49 cents of gross profit from each dollar of net sales.

  

Gross profit is the difference between the selling price and the cost of goods sold during the period. The gross profit percentage is the average amount of gross profit earned on each dollar of net sales. For this company, the rate was 48.7%, which means that the company earned nearly 49 cents of gross profit from each dollar of net sales.

  

Requirement 3:

Evaluate the 2009 results in light of the 48% gross profit percentage in 2008.

 
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	The increase in gross profit percentage means that Wolverine World Wide is earning more gross profit per dollar of sales in 2009 than it did in 2008.
	The decrease in gross profit percentage means that Wolverine World Wide is earning less gross profit per dollar of sales in 2009 than it did in 2008.

In 2008-09, the gross profit percentage rose from 48% to 48.7%.  This means that Wolverine World Wide is earning more gross profit per dollar of sales in 2008-09 than it did in the prior year. It’s only 0.7 cents per dollar more, but with $1.3 billion in sales, this equals $9.1 million more in gross profit.

Requirement 4:

Compare Wolverine's gross profit percentage to Wal-Mart's average gross profit percentage of 32.5%. From this information, which company is more successful?

 
rev: 03-02-2011

	Wal-Mart
	Wolverin

Wolverine generated more gross profit per sales dollar than Wal-Mart as indicated by its larger gross profit percentage.  Wolverine generated 48.7 cents of gross profit for each dollar of sales, compared to 32.5 cents of gross profit for each dollar of sales generated by Wal-Mart. In other words, Wolverine produced 16.2 cents more (48.7 – 32.5) on every sales dollar than Wal-Mart.

  

We should not, however, jump to the conclusion that Wolverine is more successful on an overall basis because the gross profit percentage does not take into consideration the sheer volume of merchandise sold.  Wal-Mart's strategy is to sell at low prices (resulting in a lower gross profit percentage) but then benefit from a huge volume of sales.