1. Vertical Analysis of Income Statement

   For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $21,000 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	$734,000		$631,000
   Cost of goods sold	389,020		359,670
   Gross profit	$344,980		$271,330
   Selling expenses	$146,800		$119,890
   Administrative expenses	80,740		82,030
   Total operating expenses	$227,540		$201,920
   Income from operations	$117,440		$69,410
   Other income	36,700		31,550
   Income before income tax	$154,140		$100,960
   Income tax expense	58,720		37,860
   Net income	$95,420		$63,100

   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	$734,000	%	$631,000	%
   Cost of goods sold	389,020	%	359,670	%
   Gross profit	$344,980	%	$271,330	%
   Selling expenses	146,800	%	119,890	%
   Administrative expenses	80,740	%	82,030	%
   Total operating expenses	$227,540	%	$201,920	%
   Income from operations	$117,440	%	$69,410	%
   Other income	36,700	%	31,550	%
   Income before income tax	$154,140	%	$100,960	%
   Income tax expense	58,720	%	37,860	%
   Net income	$95,420	%	$63,100	%

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   2. The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses)

   • improved
   • deteriorated
   as a percentage of sales. As a result, net income as a percentage of sales
   • increased
   • decreased
   . The sales promotion campaign appears to have been
   • successful
   • unsuccessful
   . While selling expenses as a percent of sales
   • increased
   • decreased
   slightly, the
   • increased
   • decreased
   cost was more than made up for by
   • increased
   • decreased
   sales.