Mama's Steakhouse

Condensed Income Statement & Statement of Retained Earnings

For the period: January 1, 2012 to December 31, 2012

Income Statement

(Round to one decimal place)

Sales

$1,000,000

Cost of Sales

530,000

Gross Profit

470,000

Operating Expenses (excluding depreciation)

388,000

Depreciation

33,000

Operating Income

49,000

Interest

19,000

Income Before Income Taxes

30,000

Income Taxes (40%)

23,000

Net Profit

7,000

a) What is the purpose of completing a Vertical Analysis?

b) Based on the Cost of Sales%, what is your analysis of Mama's Steakhouse?