Sports Emporium has two operating segments: sporting goods and sports apparel. T

Question

Sports Emporium has two operating segments: sporting goods and sports apparel. The income statement for each operating segment is presented below Required: 1. Complete the "96" columns to be used in a vertical analysis of Sports Emporium's two operating segments. Express each amount as a percentage of sales. Round your answers to 1 decimal place. SPORTS EMPORIUM Income Statement For the Year Ended December 31, 2018 Sporting Goods Sports Apparel $ 1,950,000 1,100,000 850,000 510,000 340,000 23,000 363,000 86,000 $ 277 000 S 1,030,000 470,000 560,000 400,000 160,000 (18,000) 142,000 76,000 63.000 Net sales Cost of goods sold Gross profi Operating expenses Operating income Other income (expense) Income before tax Income tax expense Net income 2. Use vertical analysis to compare the profitability of the two operating segments Which segment has a higher net income as a percentage of net sales? Sporting Goods Sports Apparel

Explanation / Answer

Sporting goods Sports Apparel Net sales 1950000 100.0% 1030000 100.0% Cost of goods sold 1100000 56.4% 470000 45.6% Gross profit 850000 43.6% 560000 54.4% Operating expenses 510000 26.2% 400000 38.8% Operating income 340000 17.4% 160000 15.5% Other income(expenses) 23000 1.2% -18000 -1.7% Income before tax 363000 18.6% 142000 13.8% Income tax expense 86000 4.4% 76000 7.4% Net income 277000 14.2% 66000 6.4% 2 Sporting goods has higher net income percentage

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