M13-2 Calculations for Vertical Analyses [LO 13-3] Using the following income st

Question

M13-2 Calculations for Vertical Analyses [LO 13-3] Using the following income statements, perform the calculations needed for vertical analyses. (Round percentage values to 1 decimal place.) LOCKEY FENCING CORPORATION Income Statements For the Years Ended December 31 Current Previous Net Sales Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Income from Operations Interest Expense Income before Income Tax Income Tax Expense Net Income $ 130,000 70,000 60,000 10,800 49,200 3,600 45,600 13,680 $ 31,920 %| $ 93,000 54,000 39,000 5,700 33,300 4,650 28,650 8,595 %| $ 20,055

Explanation / Answer

Under vertical analysis;each item is represented as a percentage of sales for that period.

Hence cost of goods sold for current year would be=(70000/130,000)=53.8%(Approx) while that for the previous year =(54000/93000)=58.1%(Approx) and so on.

Current Proposed Net Sales 130000 100% 93000 100% Cost of goods sold 70000 53.8% 54000 58.1% Gross profit 60000 46.2% 39000 41.9% Selling General and administrative expenses 10800 8.3% 5700 6.1% Income from operations 49200 37.9% 33300 35.8% Interest Expense 3600 2.8% 4650 5% Income before income tax 45600 35.1% 28650 30.8% Income tax expense 13680 10.5% 8595 9.2% Net income 31920 24.6% 20055 21.6%

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