Revenue and expense data for Young Technologies Inc. are as follows: Year 2 Year 1 Sales $ 500 , 000 $ 440 , 000 Cost of goods sold 325 , 000 242 , 000 Selling expenses 70 , 000 79 , 200 Administrative expenses 75 , 000 70 , 400 Income tax expense 10 , 500 16 , 400 \begin{array}{lrr} & ext { Year } 2 & ext { Year } 1\ ext { Sales } & \$ 500,000 & \$ 440,000 \ ext { Cost of goods sold } & 325,000 & 242,000 \ ext { Selling expenses } & 70,000 & 79,200 \ ext { Administrative expenses } & 75,000 & 70,400 \ ext { Income tax expense } & 10,500 & 16,400\end{array} Sales Cost of goods sold Selling expenses Administrative expenses Income tax expense Year 2 $500 , 000 325 , 000 70 , 000 75 , 000 10 , 500 Year 1 $440 , 000 242 , 000 79 , 200 70 , 400 16 , 400 (a)Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round to the nearest whole percent.(b)Comment on the significant changes disclosed by the comparative income statement.

Question

Revenue and expense data for Young Technologies Inc. are as follows:​​    Year  2  Year  1  Sales  $ 500 , 000 $ 440 , 000  Cost of goods sold  325 , 000 242 , 000  Selling expenses  70 , 000 79 , 200  Administrative expenses  75 , 000 70 , 400  Income tax expense  10 , 500 16 , 400 \begin{array}{lrr} & 	ext { Year } 2 & 	ext { Year } 1\	ext { Sales }  &  \$ 500,000  &  \$ 440,000 \	ext { Cost of goods sold }  &  325,000  &  242,000 \	ext { Selling expenses }  &  70,000  &  79,200 \	ext { Administrative expenses }  &  75,000  &  70,400 \	ext { Income tax expense }  &  10,500  &  16,400\end{array}  Sales   Cost of goods sold   Selling expenses   Administrative expenses   Income tax expense  ​  Year  2 $500 , 000 325 , 000 70 , 000 75 , 000 10 , 500 ​  Year  1 $440 , 000 242 , 000 79 , 200 70 , 400 16 , 400 ​   (a)Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round to the nearest whole percent.(b)Comment on the significant changes disclosed by the comparative income statement.

Rylea Marcum · Accepted Answer

Final Answer : ​   (b)The vertical analysis indicates that the cost of goods sold as a percent of sales increased by 10%(65% vs. 55%) between the two years. Selling and administrative expenses as a percentage of sales decreased by 5%, and income tax expense decreased by 2%. Overall, net income as a percent of sales dropped by 3%.

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