Question

According to the producer price Index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 38 percent between January and December 2016 Required: 1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016 2-0. Conduct a vertical analysis by expressing each line as a percentage of total revenues. 2-b. Excluding income tax, Interest, and operating expenses, did Computer Tycoon earn more profit per dollar of sales in 2016 compared to 2015? Complete this question by entering your answers in the tabs below. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. (Decreases should be indicated by a minus sign. Round percentage values to 1 decimal place.) COMPUTER TYCOON, INC. Income Statements For the Year Ended December 31 2015 Dollars Percentage $ Sales Revenue Cost of Goods Sold Gross Profit Selling General and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 2016 100.000 60,000 40 000 36.000 500 3.500 1,000 2.500 120,000 71,500 48.500 37 000 475 11,025 5,000 6,025 $ Req2A >

Answer 1

Ans. 1	COMPUTER   TYCOON, INC.
	Income Statements
	For Years Ended December 31
		2016	2015	Amount change	Percentage change
	Sales	$100,000	$120,000	-$20,000	-16.7%
	Cost of goods sold	$60,000	$71,500	-$11,500	-16.1%
	Gross profit	$40,000	$48,500	-$8,500	-17.5%
	Selling, General and Administrative expenses	$36,000	$37,000	-$1,000	-2.7%
	Interest expenses	$500	$475	$25	5.3%
	Income before income tax expenses	$3,500	$11,025	-$7,525	-68.3%
	Income tax expenses	$1,000	$5,000	-$4,000	-80.0%
	Net income	$2,500	$6,025	-$3,525	-58.5%
	Change in amount = Particular amount of current year 2016 - Particular amount of previous year 2015
	Change in percentage = Change in amount / particular amount of base (2015) or previous year * 100
Ans. 2 a	COMPUTER   TYCOON, INC.
	Income Statements
	For Years Ended December 31
		2016		2015
		Amount	%	Amount	%
	Sales	$100,000	100.0%	$120,000	100.0%
	Cost of goods sold	$60,000	60.0%	$71,500	59.6%
	Gross profit	$40,000	40.0%	$48,500	40.4%
	Selling, General and Administrative expenses	$36,000	36.0%	$37,000	30.8%
	Interest expenses	$500	0.5%	$475	0.4%
	Income before income tax expenses	$3,500	3.5%	$11,025	9.2%
	Income tax expenses	$1,000	1.0%	$5,000	4.2%
	Net income	$2,500	2.5%	$6,025	5.0%
	Amount is percentage for 2016 =   Particular amount of 2016 / Sales * 100
	Amount is percentage for 2015 =   Particular amount of 2015 / Sales * 100
Ans. 2 b	No, the gross profit rate on sales in 2016 (40%) is less than 2015 (40.4%).