If Rick's sales decreased from $90,000 (year 1)to $45,000 (year 2)and its cost of goods sold decreased from $40,000 (year 1)to $15,000 (year 2),then vertical analysis based on sales would show the following for cost of goods sold for the two periods:
A)33.33% and 44.44%.
B)44.44% and 33.33%.
C)300% and 225%.
D)None of the above

Question

Quizplus · Accepted Answer

To calculate the vertical analysis based on sales for cost of goods sold, we need to divide cost of goods sold by sales for both years and then multiply by 100.

For year 1: 
Cost of goods sold / Sales = 40,000 / 90,000 = 0.4444
Vertical analysis = 0.4444 x 100 = 44.44%

For year 2: 
Cost of goods sold / Sales = 15,000 / 45,000 = 0.3333 
Vertical analysis =  0.3333 x 100 = 33.33%

Therefore, the vertical analysis based on sales for cost of goods sold for the two periods are 44.44% and 33.33%. The best choice is B.

If Rick's Sales Decreased from $90,000 (Year 1)to $45,000 (Year