Question

Assuming net sales are $235,000 and COGS is $75,000, what percentage of net sales is COGS using vertical analysis?

a) 31.9%

b) 42.6%

c) 25.5%

d) 11.3%

Answer 1

To find the percentage of net sales that COGS represents using vertical analysis, divide COGS by net sales and multiply by 100. For the given figures, COGS is 31.9% of net sales, so option (a) is correct.

Step-by-step explanation:

To determine what percentage of net sales is COGS using vertical analysis, we need to divide the cost of goods sold (COGS) by net sales and then multiply by 100 to get the percentage. Here, the COGS is $75,000 and the net sales are $235,000.

Performing the calculation:

Percentage of net sales that is COGS = (COGS / Net Sales) × 100
= ($75,000 / $235,000) × 100
= 0.3191 × 100
= 31.9%

Therefore, the correct answer is (a) 31.9%.

This is a common type of calculation in financial analysis, which helps businesses to understand the cost structure and profitability of their sales.