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The common size statement shows that there are many significant changes throughout the period. It will now be useful to consider some of the changes that were highlighted, in more detail. First we will prepare a cost analysis statement showing changes in income and costs year-on-year. This can be reconciled to the changes in the profit before tax figures year-on-year.
|Cost of sales||37,800||89,500||90,000|
|Retail and distribution costs||35,200||52,300||53,900|
|Miscellaneous –(balancing figure)||1,800||200||2,300|
|Profit / –Loss before tax||1,900||–8,500||–65,500|
|Included in the above:|
|Operating lease/hire charges||9,500||5,500||15,100|
|Exchange differences –fav +adv||0||–3,200||–17,300|
Cost analysis statement year-on-year
In the table above, we can see that the incremental revenue for the period 2011/12 was £132.5 million, while the incremental increase in costs was £198 million, which produced a reduction in the profit before tax of £65.5 million.
When we examine the figures for 2011/12 it can be seen that the cost of sales and retail and distribution cost increases are in line with the previous year even though incremental revenues have fallen. Given a similar decrease in costs for both items, cost of sales should be nearer to £77.6 million and retail and distribution costs nearer to £45.3 million. This shows that an additional £21 million was ‘consumed’ given the pro–rata movement.
Still considering the figures for 2011/12, the most obvious movement is in administration costs, a £40.9 million increase over the 2010/11 figure. Over a three year period this figure increases to £64.3 million.
In the bottom section of the statement we show a breakdown of some of the cost increases included in the top section. An interesting movement is the £35.3 million increase in staff costs of 2011/12. Looking at the three year period we see substantial increases in staff costs, 2009/10 saw £33.1 million increase and 2010/11 saw £29.1 million increase, some £97.5 million in the three years.