Olivera Company provides the following data for the year 2013:
$$\begin{array} { l r }
\text { Sales revenue } & \$ 400,000 \
\text { Sales returns and allowances } & \$ 1,200 \
\text { Sales discounts } & \$ 800 \
\text { Cost of goods sold } & \$ 255,000
\end{array}$$
On a vertical analysis, what percentage would be shown for gross profit?
A) 35.9%
B) 35.6%
C) 56.1%
D) 44.1%

Question

Olivera Company provides the following data for the year 2013:
$$\begin{array} { l r } 
\text { Sales revenue } & \$ 400,000 \
\text { Sales returns and allowances } & \$ 1,200 \
\text { Sales discounts } & \$ 800 \
\text { Cost of goods sold } & \$ 255,000
\end{array}$$
On a vertical analysis, what percentage would be shown for gross profit?
A) 35.9%
B) 35.6%
C) 56.1%
D) 44.1%

Quizplus · Accepted Answer

First, calculate the net sales by subtracting sales returns and allowances and sales discounts from sales revenue: $400,000 - $1,200 - $800 = $398,000. Then, calculate the gross profit by subtracting the cost of goods sold from net sales: $398,000 - $255,000 = $143,000. Finally, calculate the percentage of gross profit to sales revenue: ($143,000 / $398,000) * 100 = 35.9%.

Olivera Company Provides the Following Data for the Year 2013