Income statements for Burch Company for Year 3 and Year 4 follow:

BURCH COMPANY Income Statements
	Year 4				Year 3
Sales	$	240,000			$	200,000
Cost of goods sold		180,000				124,000
Selling expenses		26,000				20,000
Administrative expenses		12,000				18,000
Interest expense		7,500				8,000
Total expenses	$	225,500			$	170,000
Income before taxes		14,500				30,000
Income taxes expense		1,200				3,000
Net income	$	13,300			$	27,000

Required a. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. b. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.

BURCH COMPANY
Vertical Analysis of Income Statements
	Percentage of Sales Year 4		Percentage of Sales Year 3
Sales		%		%
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses
Income before taxes
Income taxes expense
Net income		%		%