Question

Faso Fabricating, Inc. and Spinoza Fabrication Corp. are in the same industry and are located in the same region of the country. They have condensed income statements as shown. Faso Fabricating, Inc. Spinoza Fabrication Corp. Year 2 Year 1 Year 2 Year 1 Sales $362,000 $338,000 $422,000 $395,000 Total operating expenses 285,000 245,000 305,000 285,000 Net income 77,000 93,000 117,000 110,000 Using horizontal analysis, calculate the percent change for sales for each company. Round percentages to one decimal place. Oa. Faso: 6.6%; Spinoza: 6.4% Ob. Faso: 7.1%; Spinoza: 6.8% Oc. Faso: 27.5%; Spinoza: 27.8% Od. Faso: 16.3%; Spinoza: 7.0%

Answer 1

% change in sales for horizontal analysis=(Sales for year 2-Sales for year 1)/Sales for year 1

% change in sales for:

Faso Fabricating Inc=(362,000-338000)/338000

=7.1%(Approx)

Spinoza Fabrication Corp=(422,000-395000)/395000

=6.8%(Approx)

Hence the correct option is:

Faso=7.1%;Spinoza=6.8%