For 2012 selene company initiated a sales promotion

Reference no: EM13605143

For 2012, Selene Company initiated a sales promotion campaign that included the expenditure of an additional $25,000 for advertising. At the end of the year, Scott Brown, the president, is presented with the following condensed comparative income statement:

Selene Company
Comparative Income Statement
For the Years Ended December 31, 2012 and 2011

2012 2011

Sales $999,600 $867,000

Sales returns and allowances 19,600 17,000

Net sales $980,000 $850,000

Cost of goods sold 460,600 433,500

Gross profit $519,400 $416,500

Selling expenses $225,400 $178,500

Administrative expenses 107,800 102,000

Total operating expenses $333,200 $280,500

Income from operations $186,200 $136,000

Other income 49,000 42,500

Income before income tax $235,200 $178,500

Income tax expense 98,000 85,000
Net income $137,200 $ 93,500

Instructions

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 one decimal place.

2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1).

Reference no: EM13605143

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