Exercise A Income statement data for Boston Company for 2015 and 2016 follow: 20
ID: 2591658 • Letter: E
Question
Exercise A Income statement data for Boston Company for 2015 and 2016 follow:
2015 2016
Net sales $2,610,000 $1,936,000
Cost of goods sold 1,829,600 1,256,400
Selling expenses 396,800 350,000
Administrative expenses 234,800 198,400
Federal income taxes 57,600 54,000
Prepare a horizontal analysis.
Prepare vertical analysis of the income data using net sales as the base.
Comment on the results of this analysis.
Explanation / Answer
Horizontal analysis
Vertical analysis
The net sales have decreased in 2016 from 2015. All other expenses have also decreased, but the cost of goods sold has decreased by more than the decrease in net sales, thus resulting in a higher gross margin.
The cost of goods sold has decreased as a percentage of sales in 2016 as seen from vertical analysis. however, the selling and administrative expenses have increased as a percentage of sales and so has the federal income taxes.
2015 2016 Increase/decrease Amount Percent Net sales $26,10,000 $19,36,000 -$6,74,000 -25.82% Cost of goods sold $18,29,600 $12,56,400 -$5,73,200 -31.33% selling expenses $3,96,800 $3,50,000 -$46,800 -11.79% adminstrative expenses $2,34,800 $1,98,400 -$36,400 -15.50% federal income taxes $57,600 $54,000 -$3,600 -6.25%Related Questions
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