If Net Sales at Baskin's Bakery increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000,the vertical analysis based on net sales would show the following percentages for cost of goods sold (rounded to nearest %):
A)40% and 20%.
B)10% and 30%.
C)50% and 67%.
D)67% and 40%.

Question

Quizplus · Accepted Answer

To calculate the vertical analysis based on net sales, we need to divide each item by net sales and multiply by 100 to get the percentage.

Cost of goods sold percentage = (Cost of goods sold/Net Sales) x 100

For the first scenario: 
Cost of goods sold percentage = (20,000/40,000) x 100 = 50%

For the second scenario: 
Cost of goods sold percentage = (40,000/60,000) x 100 = 66.67% 
(rounded to nearest % = 67%)

Thus, the vertical analysis based on net sales would show the following percentages for cost of goods sold: 50% and 67%, which corresponds to choice C.

If Net Sales at Baskin's Bakery Increased from $40,000 to $60,000