If Rick's sales increased from $40,000 to $80,000 and its cost of goods sold increased from $25,000 to $60,000,then vertical analysis based on sales would show the following for cost of goods sold for the two periods:
A)75% and 62.5%.
B)62.5% and 75%
C)133.33% and 160%
D)160% and 133.33%.

Question

Quizplus · Accepted Answer

To calculate the percentage of cost of goods sold based on sales, we divide the cost of goods sold by the sales and multiply by 100.

For the first period:
Cost of goods sold percentage = ($25,000 ÷ $40,000) × 100% = 62.5%

For the second period:
Cost of goods sold percentage = ($60,000 ÷ $80,000) × 100% = 75%

Therefore, the vertical analysis based on sales would show that the cost of goods sold was 62.5% of sales in the first period and 75% of sales in the second period. The best choice is B.

If Rick's Sales Increased from $40,000 to $80,000 and Its