Reference no: EM13331750
For 2010, Othere Technology Company initiated a sales promotion campaign that included the expenditure of an additional $20,000 for advertising. At the end of the year, George Wallace, the president, is presented with the following condensed comparative income statement:
OTHERE TECHNOLOGY COMPANY
Comparative Income Statement
For the Years Ended December 31, 2010 and 2009
2010 2009
Amount Amount
Sales $714,000 $612,000
Sales returns and allowances 12,000 14,000 Net sales $700,000 $600,000 Cost of goods sold 322,000 312,000 Gross profit $378,000 $288,00
Selling expenses $154,000 $120,000
Administrative expenses 70,000 66,000
Total operating expenses $224,000 $186,000
Income from operations $154,000 $102,000
Other income 28,000 24,000
Income before income tax $182,000 $126,000
Income tax expense (benefit) 70,000 60,000
Net income (loss) $112,000 $66,000
1.Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to net sales for each of the years. Round to the nearest decimal place.
2.To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1)
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