Chapter 12, Problem 12.1BP

Game-On Sports operates in two distinct segments: athletic equipment and accessories. The income statement for each operating segment is presented below.

Perform vertical analysis (LO12–1)

GAME-ON SPORTS Income Statement For the year ended December 31, 2018
	Athletic Equipment		Accessories
	Amount	%	Amount	%
Net sales	$3,050,000		$3,500,000
Cost of goods sold	1,350,000		1,670,000
Gross profit	1,700,000		1,830,000
Operating expenses	750,000		800,000
Operating income	950,000		1,030,000
Other income (expense)	80,000		(15,000)
Income before tax	1,030,000		1,015,000
Income tax expense	235,000		210,000
Net income	$ 795,000		$ 805,000

Required:

  1.    Complete the “%” columns to be used in a vertical analyst of Game-On Sports’ two operating segments. Express each amount as a percentage of sales.

  2.    Use vertical analysis to compare the profitability of the two operating segments. Which segment is more profitable?