Merchandise Mavens Corporation sells goods throughout North America. One of its product lines has recently reported the following information to you at head office. Based on this information, you have become concerned that the company is experiencing difficulties selling the product.

Required:

1. Prepare a multi step income statement for internal reporting purposes, stopping at the gross profit subtotal. Use a separate column to report each year's results, similar to Exhibit 6.9.

2. Analyze the information to identify two observations that lead to your concern.