The average price of a gallon of gas in 2015 dropped $0.94 (28 percent) from $3.34 in 2014 (to $2.40 in 2015). Let’s see whether these changes are reflected in the income statement of Chevron Corporation for the year ended December 31, 2015 (amounts in billions).

Required:

1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages (rounded to one decimal place). How did the change in gas prices compare to the changes in Chevron’s total revenues and costs of crude oil and products?

2. Conduct a vertical analysis by expressing each line as a percentage of total revenues (round to one decimal place). Excluding income tax and other operating costs, did Chevron earn more profit per dollar of revenue in 2015 compared to 2014?

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2015 2014 Revenues $140 $210 Costs of Purchased Crude Oil and Products 70 120 Other Operating Costs Income before Income Tax Expense 65 60 30 Income Tax Expense Net Income 10 $ 5 $ 20