Gavette Company reported the following information for the current year and prior year: What would a vertical analysis report with respect to current year selling and general expenses?
A)An increase of $74,768
B)23.63% of net sales revenue
C)A decrease of 23.63%
D)16.37% of net sales revenue

Question

Gavette Company reported the following information for the current year and prior year:  What would a vertical analysis report with respect to current year selling and general expenses?
A)An increase of $74,768 
B)23.63% of net sales revenue 
C)A decrease of 23.63% 
D)16.37% of net sales revenue

Quizplus · Accepted Answer

A vertical analysis compares each line item on a financial statement to a base amount, which is typically net sales revenue. Therefore, to determine the percentage of net sales revenue that selling and general expenses represent in the current year, you would divide the current year selling and general expenses amount ($574,768) by the current year net sales revenue amount ($2,430,000). This calculation gives 0.2363, or 23.63%.

Gavette Company Reported the Following Information for the Current Year