Vertical Analysis of Income Statement

Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:

	Current Year		Previous Year
Sales	$604,000		$532,000
Cost of goods sold	392,600		319,200
Selling expenses	84,560		85,120
Administrative expenses	90,600		74,480
Income tax expense	12,080		21,280

a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

Innovation Quarter Inc.
Comparative Income Statement
For the Years Ended December 31
	Current year Amount	Current year Percent	Previous year Amount	Previous year Percent
Sales	$604,000	%	$532,000	%
Cost of goods sold	392,600	%	319,200	%
	$	%	$	%
Selling expenses	84,560	%	85,120	%
Administrative expenses	90,600	%	74,480	%
	$	%	$	%
		%		%
Income tax expense	12,080	%	21,280	%
	$	%	$	%

b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 percentage points, while selling expenses by 2 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales by 2 percentage points.