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Perform a vertical analysis for the entry "Gross Sales" on the portion of an income statement shown below. (Round to the nearest tenth.) Revenue Gross Sales $ 250,000 Less: Sales returns and Allowances 10,000 Net Sales 240,000 Operating Expenses Salaries and Benefits 90,800 Rent and Utilities 21,400 Advertising and Promotions 1,250 Insurance 2,500 Miscellaneous Expenses 17,500 Total Operating Expenses 133,450 4.2% 13.1% 104.2% O 106.5%

Perform a vertical analysis for the entry "Gross Sales" on the portion of an income statement shown below. (Round to the nearest tenth.) Revenue Gross Sales $ 250,000 Less: Sales returns and Allowances 10,000 Net Sales 240,000 Operating Expenses Salaries and Benefits 90,800 Rent and Utilities 21,400 Advertising and Promotions 1,250 Insurance 2,500 Miscellaneous Expenses 17,500 Total Operating Expenses 133,450 4.2% 13.1% 104.2% O 106.5%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Perform a vertical analysis...
### Vertical Analysis of Gross Sales Perform a vertical analysis for the entry "Gross Sales" on the portion of an income statement shown below. (Round to the nearest tenth.) #### Income Statement **Revenue:** - **Gross Sales:** $250,000 - **Less: Sales Returns and Allowances:** $10,000 **Net Sales:** $240,000 **Operating Expenses:** 1. **Salaries and Benefits:** $90,800 2. **Rent and Utilities:** $21,400 3. **Advertising and Promotions:** $1,250 4. **Insurance:** $2,500 5. **Miscellaneous Expenses:** $17,500 **Total Operating Expenses:** $133,450 #### Analysis Options for Gross Sales Entry: - 4.2% - 13.1% - 104.2% - **106.5%** (Correct Answer, as indicated by the selection and the checkmark) ### Explanation of Vertical Analysis Vertical analysis involves comparing each entry in a financial statement to a base number to understand the relative proportions of each item. In this case, we are analyzing Gross Sales. The correct vertical percentage for Gross Sales in relation to the Total Operating Expenses ($250,000 / $133,450 * 100%) is 106.5%, which suggests that the selected and correct answer on the given options is 106.5%.
Transcribed Image Text:### Vertical Analysis of Gross Sales Perform a vertical analysis for the entry "Gross Sales" on the portion of an income statement shown below. (Round to the nearest tenth.) #### Income Statement **Revenue:** - **Gross Sales:** $250,000 - **Less: Sales Returns and Allowances:** $10,000 **Net Sales:** $240,000 **Operating Expenses:** 1. **Salaries and Benefits:** $90,800 2. **Rent and Utilities:** $21,400 3. **Advertising and Promotions:** $1,250 4. **Insurance:** $2,500 5. **Miscellaneous Expenses:** $17,500 **Total Operating Expenses:** $133,450 #### Analysis Options for Gross Sales Entry: - 4.2% - 13.1% - 104.2% - **106.5%** (Correct Answer, as indicated by the selection and the checkmark) ### Explanation of Vertical Analysis Vertical analysis involves comparing each entry in a financial statement to a base number to understand the relative proportions of each item. In this case, we are analyzing Gross Sales. The correct vertical percentage for Gross Sales in relation to the Total Operating Expenses ($250,000 / $133,450 * 100%) is 106.5%, which suggests that the selected and correct answer on the given options is 106.5%.
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