For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $18,000 for adve
rtising. 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
1
20Y2
20Y1
2
Sales
$1,500,000.00
$1,250,000.00
3
Cost of goods sold
510,000.00
475,000.00
4
Gross profit
$990,000.00
$775,000.00
5
Selling expenses
$270,000.00
$200,000.00
6
Administrative expenses
180,000.00
156,250.00
7
Total operating expenses
$450,000.00
$356,250.00
8
Income from operations
$540,000.00
$418,750.00
9
Other income
60,000.00
50,000.00
10
Income before income tax
$600,000.00
$468,750.00
11
Income tax expense
450,000.00
375,000.00
12
Net income
$150,000.00
$93,750.00
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. Round your percentages to one decimal place. Enter all amounts as positive numbers.
2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1).
Tri-Comic Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Sales
$1,500,000.00
$1,250,000.00
3
Cost of goods sold
510,000.00
475,000.00
4
Gross profit
$990,000.00
$775,000.00
5
Selling expenses
$270,000.00
$200,000.00
6
Administrative expenses
180,000.00
156,250.00
7
Total operating expenses
$450,000.00
$356,250.00
8
Income from operations
$540,000.00
$418,750.00
9
Other income
60,000.00
50,000.00
10
Income before income tax
$600,000.00
$468,750.00
11
Income tax expense
450,000.00
375,000.00
12
Net income
$150,000.00
$93,750.00
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. Round your percentages to one decimal place. Enter all amounts as positive numbers.
2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1).
1 answer:
Answer:
Explanation:
1. Please refer to the attached file.
2. The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses) decreased as a percentage of sales. As a result: net income as a percentage of sales increased by 2.5 percentage points. The sales promotion campaign appears to have been increased. While selling expenses as a percent of sales increased slightly, the decreased cost was more than made up for by increased sales.
You might be interested in