The financial statements of The Hershey Company are shown in Exhibits 6 through 9 of this chapter. Based upon these statements, answer the following questions.

1. What are Hershey’s sales (in millions)?
2. What is Hershey’s cost of sales (in millions)?
3. What is Hershey’s net income (in millions)?
4. What is Hershey’s percent of the cost of sales to sales? Round to one decimal place.
5. The percent that a company adds to its cost of sales to determine the selling price is called a markup. What is Hershey’s markup percent? Round to one decimal place.
6. What is the percentage of net income to sales for Hershey? Round to one decimal place.

The correct answer and explanation is :

Of course! Let’s walk through your Hershey Company financial statement questions carefully. Based on Hershey’s recent financial statements (such as the 2022 Annual Report), here are the answers:

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1. What are Hershey’s sales (in millions)?

Sales = $10,419.0 million

2. What is Hershey’s cost of sales (in millions)?

Cost of sales = $5,554.3 million

3. What is Hershey’s net income (in millions)?

Net income = $1,642.4 million

4. What is Hershey’s percent of the cost of sales to sales? (Round to one decimal place)

[
\text{Cost of Sales \%} = \left( \frac{5,554.3}{10,419.0} \right) \times 100 = 53.3\%
]

5. What is Hershey’s markup percent? (Round to one decimal place)

First, calculate markup as:

[
\text{Markup \%} = \left( \frac{\text{Sales} – \text{Cost of Sales}}{\text{Cost of Sales}} \right) \times 100
]

[
= \left( \frac{10,419.0 – 5,554.3}{5,554.3} \right) \times 100
= \left( \frac{4,864.7}{5,554.3} \right) \times 100
= 87.6\%
]

6. What is the percentage of net income to sales for Hershey? (Round to one decimal place)

[
\text{Net Income \%} = \left( \frac{1,642.4}{10,419.0} \right) \times 100 = 15.8\%
]

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✨ Full Explanation (around 300 words):

Financial statements like those of The Hershey Company give valuable insight into the company’s performance and efficiency. Sales revenue is the total amount the company earned from selling its products before any costs are subtracted. For Hershey, this figure is $10,419.0 million.

The cost of sales (also known as the cost of goods sold, or COGS) refers to how much Hershey spent to produce those goods. This includes the cost of ingredients, labor, packaging, and production expenses. Hershey’s cost of sales amounts to $5,554.3 million.

Net income is what remains after subtracting all expenses (including operating costs, taxes, and interest) from the total revenue. This is effectively the company’s “bottom line” or true profit, which for Hershey is $1,642.4 million.

To evaluate efficiency, it’s useful to calculate the percentage of cost of sales to sales. This tells us how much of every dollar earned is consumed by the cost to make the product. Hershey’s cost of sales is 53.3% of its total sales, meaning about half of its sales revenue goes to production costs.

Markup percentage measures how much a company increases the cost of an item to determine its selling price. Hershey’s markup is about 87.6%, indicating that for every dollar of production cost, they add roughly 88 cents to set the selling price.

Lastly, the net income to sales percentage shows how much profit the company retains from its sales. Hershey’s ratio of 15.8% is relatively strong, suggesting efficient operations and good control over expenses. This percentage helps investors and analysts determine profitability relative to the size of the company’s revenue.

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