For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $14,000 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	$507,000		$436,000
Cost of goods sold	248,430		231,080
Gross profit	$258,570		$204,920
Selling expenses	$96,330		$78,480
Administrative expenses	50,700		52,320
Total operating expenses	$147,030		$130,800
Income from operations	$111,540		$74,120
Other income	20,280		21,800
Income before income tax	$131,820		$95,920
Income tax expense	50,700		39,240
Net income	$81,120		$56,680

Required:

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	$507,000	fill in the blank 605658fc2fc6faf_1%	$436,000	fill in the blank 605658fc2fc6faf_2%
Cost of goods sold	248,430	fill in the blank 605658fc2fc6faf_3%	231,080	fill in the blank 605658fc2fc6faf_4%
Gross profit	$258,570	fill in the blank 605658fc2fc6faf_5%	$204,920	fill in the blank 605658fc2fc6faf_6%
Selling expenses	96,330	fill in the blank 605658fc2fc6faf_7%	78,480	fill in the blank 605658fc2fc6faf_8%
Administrative expenses	50,700	fill in the blank 605658fc2fc6faf_9%	52,320	fill in the blank 605658fc2fc6faf_10%
Total operating expenses	$147,030	fill in the blank 605658fc2fc6faf_11%	$130,800	fill in the blank 605658fc2fc6faf_12%
Income from operations	$111,540	fill in the blank 605658fc2fc6faf_13%	$74,120	fill in the blank 605658fc2fc6faf_14%
Other income	20,280	fill in the blank 605658fc2fc6faf_15%	21,800	fill in the blank 605658fc2fc6faf_16%
Income before income tax	$131,820	fill in the blank 605658fc2fc6faf_17%	$95,920	fill in the blank 605658fc2fc6faf_18%
Income tax expense	50,700	fill in the blank 605658fc2fc6faf_19%	39,240	fill in the blank 605658fc2fc6faf_20%
Net income	$81,120	fill in the blank 605658fc2fc6faf_21%	$56,680	fill in the blank 605658fc2fc6faf_22%

Question Content Area

2. The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses) improved/deteriorated as a percentage of sales. As a result, net income as a percentage of sales increased/decreased. The sales promotion campaign appears to have been successful/unsuccessful. While selling expenses as a percent of sales increased/decreased slightly, the increased/decreased cost was more than made up for by increased/decreased sales.