Income statement information for Einsworth Corporation follows:

Question

Line Item Description Amount
Sales $575,000
Cost of goods sold 166,750
Gross profit 408,250

Prepare a vertical analysis of the income statement for Einsworth Corporation. If required, round percentage answers to the nearest whole number.

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Einsworth Corporation
Vertical Analysis of the Income Statement
Line Item Description Amount Percentage
Sales $575,000 Sales
%
Cost of goods sold 166,750 Cost of goods sold
Gross profit $408,250 Gross profit
%

Answer 1

To conduct a vertical analysis of the income statement for Einsworth Corporation, we will express each line item as a percentage of total sales. The calculations will be as follows:

1. Sales will be 100% since it serves as the base amount.
2. Cost of Goods Sold (COGS) will be calculated as (COGS / Sales) * 100%.
3. Gross Profit will be calculated as (Gross Profit / Sales) * 100%.

Here are the calculations:

• COGS Percentage:
  \[ \text{COGS Percentage} = \left(\frac{166,750}{575,000}\right) \times 100 \approx 29% \]

• Gross Profit Percentage:
  \[ \text{Gross Profit Percentage} = \left(\frac{408,250}{575,000}\right) \times 100 \approx 71% \]

Now we can put the data together in the vertical analysis format:

Einsworth Corporation

Vertical Analysis of the Income Statement

| Line Item Description | Amount | Percentage | |------------------------|------------|------------| | Sales | $575,000 | 100% | | Cost of Goods Sold | $166,750 | 29% | | Gross Profit | $408,250 | 71% |

This table provides a clear view of the income statement items in relation to total sales for Einsworth Corporation.