Vertical Analysis of Income Statement

For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $18,000 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	$627,000		$539,000
Cost of goods sold	332,310		307,230
Gross profit	$294,690		$231,770
Selling expenses	$125,400		$102,410
Administrative expenses	62,700		64,680
Total operating expenses	$188,100		$167,090
Income from operations	$106,590		$64,680
Other revenue	25,080		32,340
Income before income tax	$131,670		$97,020
Income tax expense	50,160		37,730
Net income	$81,510		$59,290

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	$627,000	%	$539,000	%
Cost of goods sold	332,310	%	307,230	%
Gross profit	$294,690	%	$231,770	%
Selling expenses	125,400	%	102,410	%
Administrative expenses	62,700	%	64,680	%
Total operating expenses	$188,100	%	$167,090	%
Income from operations	$106,590	%	$64,680	%
Other revenue	25,080	%	32,340	%
Income before income tax	$131,670	%	$97,020	%
Income tax expense	50,160	%	37,730	%
Net income	$81,510	%	$59,290	%

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.