If Cara's Piano sales increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000,then vertical analysis based on sales would show the following for cost of goods sold (rounded to the nearest percent):
A)40% and 20%.
B)10% and 30%.
C)50% and 67%.
D)67% and 40%.

Question

Quizplus · Accepted Answer

To calculate the vertical analysis based on sales, we need to divide the cost of goods sold by the total sales and then multiply by 100 to get the percentage.

For the initial year:

Cost of goods sold / Sales = 20,000 / 40,000 = 0.5
Vertical analysis based on sales = 0.5 x 100 = 50%

For the current year:

Cost of goods sold / Sales = 40,000 / 60,000 = 0.67
Vertical analysis based on sales = 0.67 x 100 = 67%

So the answer is C, which shows that the cost of goods sold increased from 50% of sales to 67% of sales.

If Cara's Piano Sales Increased from $40,000 to $60,000 and Its