Vertical analysis of income statement

For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 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	$ 1,500,000	$ 1,250,000
Cost of goods sold	(510,000)	(475,000)
Gross profit	$ 990,000	$ 775,000
Selling expenses	$ (270,000)	$ (200,000)
Administrative expenses	(180,000)	(156,250)
Total operating expenses	$ (450,000)	$ (356,250)
Operating income	$ 540,000	$ 418,750
Other revenue	60,000	50,000
Income before income tax expense	$ 600,000	$ 468,750
Income tax expense	(450,000)	(375,000)
Net income	$ 150,000	$ 93,750

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. Round percentages to one decimal place. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 2012 and 20Y1 20Y2 20Y2 20Y1 Amount Percent Amount $ 1,500,000 100 % 1,250,000 20Y1 Percent 100 % Sales Cost of goods sold 510,000 X 34 X % 475,000 X 38 X % Gross profit $ 990,000 66 % $ 775,000 62 % Selling expenses 270,000 X 18 X % $ 200,000 x 16 X % Administrative expenses 180,000 X 12 X % 156,250 X 12.5 X % Total operating expenses 45,000 x 30 X % $ 35,250 X 28.5 X % Operating income % % Other revenue % % Income before income tax expense $ % $ % Income tax expense % % Net income % % Feedback Check My Work 2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1). The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses) as a percentage of sales. As a result, net income as a percentage of sales The sales promotion campaign appears to have been . While selling expenses as a percent of sales increased slightly, the increased cost was more than made up for by increased