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Vertical Analysis of Income Statement For 2012, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $15,000 for advertising. At
Vertical Analysis of Income Statement For 2012, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $15,000 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 $532,000 $458,000 Cost of merchandise sold 281,960 261,060 Gross profit $250,040 $196,940 Selling expenses $111,720 $91,600 Administrative expenses 58,520 59,540 Total operating expenses $170,240 $151,140 Income from operations $79,800 $45,800 Other revenue 26,600 22,900 Income before income tax expense $106,400 $68,700 Income tax expense 42,560 $63,840 27,480 $41,220 Net income 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. 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 20Y2 20Y1 Amount Percent Amount 20Y1 Percent Sales $532,000 % $458,000 % Cost of merchandise sold 281,960 % 261,060 % Gross profit $250,040 % $196,940 % Selling expenses $111,720 % $91,600 % Administrative expenses 58,520 % 59,540 % Total operating expenses $170,240 % $151,140 % Income from operations $79,800 % $45,800 % Other revenue 26,600 % 22,900 % Income before income tax expense $106,400 % $68,700 % Income tax expense 42,560 % 27,480 % Net income $63,840 % $41,220 % 2. The vertical analysis indicates that the costs other than selling expenses (cost of merchandise sold and administrative expenses) net income as a percentage of sales The sales promotion campaign appears to have been slightly, the cost was more than made up for by sales. as a percentage of sales. As a result, . While selling expenses as a percent of sales
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