Question

The following is the selected information about the Little Dipper Company for the current year and prior year.
Account
Current Prior Net sales revenue $651,000 $595,000
Cost of goods sold $417,720 $425,000
Gross profit $233,280 $170,000
Selling/general expenses $149,040 $93,500
Net income before tax $84,240 $76,500
Income tax $25,920 $22,800
Net income $58,320 $53,700
What is the current year's cost of goods sold percentage (as would be found on a vertical analysis of the income statement for the current year)?

Answer 1

Answer:

Consider the following calculation

Explanation:

Under Veritical analysis of Income statement every line item is compared as a percentage of gross sales.

So, the cost of goods sold of the current year will be compared as a percentage of gross sales made.

Cost of goods sold in the current year = $ 417,720

Gross sales = $ 6,51,000

Cost of goods sold as a percentage = Cost of goods sold/ sales * 100

                                                               = 4,17,720 / 6,51,000 * 100

                                                               = 64%