Question
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 for advertising. At the end of the year,
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:
| Tri-Comic Company |
| Comparative Income Statement |
| For the Years Ended December 31, 20Y2 and 20Y1 |
| 1 |
| 20Y2 | 20Y1 |
| 2 | Sales | $890,000.00 | $600,000.00 |
| 3 | Cost of goods sold | 320,400.00 | 228,000.00 |
| 4 | Gross profit | $569,600.00 | $372,000.00 |
| 5 | Selling expenses | $142,400.00 | $84,000.00 |
| 6 | Administrative expenses | 62,300.00 | 54,000.00 |
| 7 | Total operating expenses | $204,700.00 | $138,000.00 |
| 8 | Income from operations | $364,900.00 | $234,000.00 |
| 9 | Other income | 80,100.00 | 54,000.00 |
| 10 | Income before income tax | $445,000.00 | $288,000.00 |
| 11 | Income tax expense | 231,400.00 | 156,000.00 |
| 12 | Net income | $213,600.00 | $132,000.00 |
| 1. | Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for each of the years. Round your percentages to one decimal place. Enter all amounts as positive numbers. |
| 2. | To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1). |
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