Jill Corporation prepared a vertical analysis of its income statement and the following excerpt is available: What is the Gross Profit for the year based on the information provided from the vertical analysis?
A)$501,600
B)$698,400
C)$618,000
D)Cannot determine from the information given

Question

Jill Corporation prepared a vertical analysis of its income statement and the following excerpt is available:  What is the Gross Profit for the year based on the information provided from the vertical analysis?
A)$501,600 
B)$698,400 
C)$618,000 
D)Cannot determine from the information given

Quizplus · Accepted Answer

The formula for gross profit is:
Gross Profit = Net Sales - Cost of Goods Sold
From the vertical analysis, we know that Cost of Goods Sold is 36% of Net Sales. Therefore,
Net Sales = 100% - 36% = 64%
We also know that Gross Profit is 48% of Net Sales. Therefore,
Gross Profit = 64% x 48% = 0.64 x 0.48 x Total Revenue
Total Revenue is not given in the question, but we can use the fact that Cost of Goods Sold is 36% to calculate it. If Cost of Goods Sold is $1,193,400 (as given in the question), then Total Revenue is:
Total Revenue = Cost of Goods Sold / 0.36 = $3,315,000
Substituting this into the formula for Gross Profit, we get:
Gross Profit = 0.64 x 0.48 x $3,315,000 = $501,600
Therefore, the answer is A) $501,600.

Jill Corporation Prepared a Vertical Analysis of Its Income Statement