Question
Vertical Analysis of Income Statement For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $20,000 for advertising. At
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Vertical Analysis of Income Statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $20,000 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 $724,000 $623,000 Cost of goods sold 369,240 348,880 Gross profit $354,760 $274,120 Selling expenses $137,560 $112,140 Administrative expenses 72,400 74,760 Total operating expenses $209,960 $186,900 Income from operations $144,800 $87,220 Other revenue 28,960 18,690 Income before income tax $173,760 $105,910 Income tax expense 72,400 43,610 Net income $101,360 $62,300 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.
Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 Amount 20Y2 Percent 20Y1 Amount 20Y1 Percent Sales $724,000 % $623,000 % Cost of goods sold 369,240 % 348,880 % Gross profit $354,760 % $274,120 % Selling expenses $137,560 % $112,140 % Administrative expenses 72,400 % 74,760 % Total operating expenses $209,960 % $186,900 % Income from operations $144,800 % $87,220 % Other revenue 28,960 % 18,690 % Income before income tax $173,760 % $105,910 % Income tax expense 72,400 % 43,610 % Net income $101,360 % $62,300 % 2. 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 slightly, the cost was more than made up for by sales.
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