Sales Cost of merchandise sold Gross profit Selling expenses Administrative expenses Total operating expenses Income from operations Income tax expense Net income Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current year Amount Current year Percent $568,000 100 % 306,720 52 X % % 102,240 % 113,600 % % % 17,040 % % Previous year Amount Previous year Percent 00 0 $488,000 52 X % 100 % 234,240 48 X % 102,480 92,720 18 X % 10 X % 28 X % 20 X % 24,400 6 X % 14 X % Feedback b. The vertical analysis indicates that the cost of merchandise sold as a percent of sales increased by 6 percentage points, while selling expenses decreased by 3 percentage points, and administrative expenses increased by 1 percentage points. Thus, net income as a percent of sales decreased by 2 percentage points.