For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $22,000 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
	20Y2		20Y1
Sales	$780,000		$671,000
Cost of merchandise sold	390,000		375,760
Gross profit	$390,000		$295,240
Selling expenses	$148,200		$120,780
Administrative expenses	78,000		80,520
Total operating expenses	$226,200		$201,300
Income from operations	$163,800		$93,940
Other revenue	31,200		40,260
Income before income tax expense	$195,000		$134,200
Income tax expense	78,000		53,680
Net income	$117,000		$80,520

Required:

Question Content Area

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. Enter percentages as whole numbers. Enter all amounts as positive numbers.

Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1

	20Y2 Amount	20Y2 Percent	20Y1 Amount	20Y1 Percent
Sales	$780,000	fill in the blank c2ba2d0c000dffb_1%	$671,000	fill in the blank c2ba2d0c000dffb_2%
Cost of merchandise sold	390,000	fill in the blank c2ba2d0c000dffb_3%	375,760	fill in the blank c2ba2d0c000dffb_4%
Gross profit	$390,000	fill in the blank c2ba2d0c000dffb_5%	$295,240	fill in the blank c2ba2d0c000dffb_6%
Selling expenses	$148,200	fill in the blank c2ba2d0c000dffb_7%	$120,780	fill in the blank c2ba2d0c000dffb_8%
Administrative expenses	78,000	fill in the blank c2ba2d0c000dffb_9%	80,520	fill in the blank c2ba2d0c000dffb_10%
Total operating expenses	$226,200	fill in the blank c2ba2d0c000dffb_11%	$201,300	fill in the blank c2ba2d0c000dffb_12%
Income from operations	$163,800	fill in the blank c2ba2d0c000dffb_13%	$93,940	fill in the blank c2ba2d0c000dffb_14%
Other revenue	31,200	fill in the blank c2ba2d0c000dffb_15%	40,260	fill in the blank c2ba2d0c000dffb_16%
Income before income tax expense	$195,000	fill in the blank c2ba2d0c000dffb_17%	$134,200	fill in the blank c2ba2d0c000dffb_18%
Income tax expense	78,000	fill in the blank c2ba2d0c000dffb_19%	53,680	fill in the blank c2ba2d0c000dffb_20%
Net income	$117,000	fill in the blank c2ba2d0c000dffb_21%	$80,520	fill in the blank c2ba2d0c000dffb_22%

Question Content Area

2. The vertical analysis indicates that the costs other than selling expenses (cost of merchandise sold and administrative expenses)

improveddeteriorated

as a percentage of sales. As a result, net income as a percentage of sales

increaseddecreased

. The sales promotion campaign appears to have been

successfulunsuccessful

. While selling expenses as a percent of sales

increaseddecreased

slightly, the

increaseddecreased

cost was more than made up for by

increaseddecreased

sales.