For 20Y6, Blue Buffalo Company initiated a sales promotion campaign that included the expenditure of an additional $60,000 for advertising. At the end of the year, Tamara Wasnuk, the president, is presented with the following condensed comparative income statement:

Instructions
1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to net sales for each of the years.
2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in(1).

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BLUE BUFFALO COMPANY Comparative Income Statement For the Years Ended December 31, 20Y6 and 20Y5 20Y6 $1,545,000 $1,500,000 20Y5 Sales Sales returns and allowances Net sales Cost of goods sold Gross profit Selling expenses Administrative expenses Total operating expenses Income from operations Other income Income before income tax Income tax expense Net income $1,224,000 24,000 $1,200,000 780,000 420,000 216,000 45,000 960 540,000 S 285,000 90 375 S 165,000 36 S 201,000 42 159 $ 312,000 108,000 36,000 $144,000 28,800 115,200