Income statement information for Sadie Company is below:
$\begin{array}{ll}
\text { Sales } & \$ 175,000 \
\text { Cost of goods sold } & \underline{115,000}\
\text { Gross profit }&\underline{\$ 60,000}
\end{array}$
Using vertical analysis of the income statement for Sadie Company,determine the gross profit margin.
A)100%
B)66%
C)34%
D)29%

Question

Income statement information for Sadie Company is below: 
$\begin{array}{ll}
\text { Sales } & \$ 175,000 \
\text { Cost of goods sold } & \underline{115,000}\
\text { Gross profit }&\underline{\$ 60,000}
\end{array}$ 
Using vertical analysis of the income statement for Sadie Company,determine the gross profit margin.
A)100%
B)66%
C)34%
D)29%

Quizplus · Accepted Answer

To determine the gross profit margin using vertical analysis, we divide gross profit by sales and then multiply by 100 to get a percentage.

Gross profit margin = (Gross profit / Sales) x 100%
= ($60,000 / $175,000) x 100%
= 34.29%

Rounding to the nearest whole percentage, the gross profit margin is 34%. Therefore, the best choice is C, 34%.

Income Statement Information for Sadie Company Is Below Using Vertical Analysis of the Income Statement for Sadie Company,determine