For 2008, Audio Tone Company initiated a sales promotion campaign that included the expenditure of an additional $13,800 for advertising. At the end of the year, Gordon Kincaid, the president, is presented with the following condensed comparative income statement:

Instructions
1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to net sales for each of the years. Round to two decimal places.
2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in(1).

Transcribed Image Text:

Audio Tone Compan Comparative Income Statement For the Years Ended December 31, 2008 and 2007 2008 2007 Sales Sales returns and allowances Net sales Cost of goods sold Gross profit Selling expens Administrative expenses Total operating expenses Income from operations Other income Income before income tax Income tax expense Net income $526,000 6,000 $520,000 213,200 $306,800 $124,800 67,600 $211200 $192,400 $114,400 2,500 2,000 $116,400 30,000 86,400 $664,000 4,000 $660,000 257,400 402,600 $138,600 72,600 $191,400 $193,900 54,000 $139,900