Question

Given the following income statement information, what percentage would appear for selling expenses in a vertical analysis?

Sales $600,000
Cost of goods sold 400,000
Selling expenses 50,000
Net income 36,000

a. 67%
b. 6%
c. 8%
d. Cannot be determined with information provided.

Answer 1

Answer: C.) 8%

Explanation:

Given the following :

Sales $600,000

Cost of goods sold 400,000

Selling expenses 50,000

Net income 36,000

what percentage would appear for selling expenses in a vertical analysis?

Each income statement item is expressed as a percentage proportion of total sales.

(Income statement item ÷ Total sales) * 100

(selling expenses ÷ total sales) * 100

(50,000 ÷ 600,000) × 100

0.08333 × 100 = 8.33%

= 8%