For 2010, Einar Industries Inc. initiated a sales promotion campaign that included the expenditure of an additional $40,000 for advertising. At the end of the year, David Heaney, the president, is presented with the following condensed comparative income statement:

Instructions1. 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 one decimal place2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in(1).

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Einar Industries Comparative Income Statement For the Years Ended December 31, 2010 and 2009 2010 2009 $420,000 20,000 $400,000 220,000 $180,000 $ 80,000 56,000 $136,000 $ 44,000 24,000 $ 68,000 28,000 $ 40,000 Sales $525,000 25,000 $500,000 280,000 Sales returns and allowances Net sales Cost of goods sold Gross profit $220,000 $130,000 65,000 $195,000 $ 25,000 30,000 $ 55,000 35,000 $ 20,000 Selling expenses Adminstrative expenses Total operating expenses Income from operations Other income Income before income tax Income tax expense (benefit) Net income (loss)