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25 August, 02:10

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) ?

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  1. 25 August, 02:33
    0
    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%
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