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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 $22,000 for advertising. At
Vertical Analysis of Income Statement For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $22,000 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, 2012 and 2041 20Y2 $799,000 415,480 $383,520 2011 Sales $687,000 398,460 Cost of goods sold Gross profit $288,540 $130,530 Selling expenses Administrative expenses $159,800 79,900 82,440 Total operating expenses $239,700 $212,970 Income from operations $143,820 47,940 $75,570 34,350 Other income Income before income tax $191,760 79,900 $109,920 41,220 Income tax expense Net income $111,860 $68,700 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, 2012 and 2011 20Y2 Amount 20Y2 Percent 20Y1 Amount 20Y1 Percent Sales $799,000 % $687,000 % Cost of goods sold 415,480 % 398,460 % Gross profit $383,520 % $288,540 Selling expenses 159,800 % 130,530 % Administrative expenses 79,900 % 82,440 % Total operating expenses $239,700 % $212,970 % Income from operations $143,820 $75,570 Other income 47,940 % 34,350 Income before income tax $191,760 % $109,920 Income tax expense 79,900 % 41,220 Net income $111,860 $68,700 % % % % % % % Income tax expense 79,900 41,220 increased Net income $111,860 $68,700 decreased The sales promotion 2. The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses) campaign appears to have been While selling expenses as a percent of sales slightly, the as a percentage of sales. As a result, net income as a percentage of sales cost was more than made up for by sales
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