A vertical analysis of two income statements for Danielle's Design Services is shown below: Danielle's Design Services Income Statements For Years 1 and 2 Ending December 31 Year 2 Year 1 Amount Percent Amount Percent Fees earned $765,340 100.0% $696,520 100.0% Operating expenses: Wages expense $254,000 33.2% $214,600 30.8% Rent expense 120,000 15.7% 108,000 15.5% Supplies expense 76,500 10.0% 98,715 14.2% Miscellaneous expense 11,680 1.5% 16,420 2.4% Total operating expenses $462,180 60.4% $437,735 62.9%* Net income $303,160 39.6% $258,785 37.1%* *Differences due to rounding Which of the following analyses reflect the data given? a.Wages expense and miscellaneous expense show an unfavorable trend, and rent and supplies expenses show an unfavorable trend. b.Wages expense and rent expense show a favorable trend, while supplies and miscellaneous expenses show an unfavorable trend. c.Wages expense and rent expense show an unfavorable trend, while supplies and miscellaneous expenses show a favorable trend. d.Wages expense and supplies expense show a favorable trend, while rent and miscellaneous expenses show an unfavorable trend.
A vertical analysis of two income statements for Danielle's Design Services is shown below: Danielle's Design Services Income Statements For Years 1 and 2 Ending December 31 Year 2 Year 1 Amount Percent Amount Percent Fees earned $765,340 100.0% $696,520 100.0% Operating expenses: Wages expense $254,000 33.2% $214,600 30.8% Rent expense 120,000 15.7% 108,000 15.5% Supplies expense 76,500 10.0% 98,715 14.2% Miscellaneous expense 11,680 1.5% 16,420 2.4% Total operating expenses $462,180 60.4% $437,735 62.9%* Net income $303,160 39.6% $258,785 37.1%* *Differences due to rounding Which of the following analyses reflect the data given? a.Wages expense and miscellaneous expense show an unfavorable trend, and rent and supplies expenses show an unfavorable trend. b.Wages expense and rent expense show a favorable trend, while supplies and miscellaneous expenses show an unfavorable trend. c.Wages expense and rent expense show an unfavorable trend, while supplies and miscellaneous expenses show a favorable trend. d.Wages expense and supplies expense show a favorable trend, while rent and miscellaneous expenses show an unfavorable trend.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 2PB
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Question
A vertical analysis of two income statements for Danielle's Design Services is shown below:
| Danielle's Design Services | ||||
| Income Statements | ||||
| For Years 1 and 2 Ending December 31 | ||||
| Year 2 | Year 1 | |||
| Amount | Percent | Amount | Percent | |
| Fees earned | $765,340 | 100.0% | $696,520 | 100.0% |
| Operating expenses: | ||||
| Wages expense | $254,000 | 33.2% | $214,600 | 30.8% |
| Rent expense | 120,000 | 15.7% | 108,000 | 15.5% |
| Supplies expense | 76,500 | 10.0% | 98,715 | 14.2% |
| Miscellaneous expense | 11,680 | 1.5% | 16,420 | 2.4% |
| Total operating expenses | $462,180 | 60.4% | $437,735 | 62.9%* |
| Net income | $303,160 | 39.6% | $258,785 | 37.1%* |
*Differences due to rounding
Which of the following analyses reflect the data given?
a.Wages expense and miscellaneous expense show an unfavorable trend, and rent and supplies expenses show an unfavorable trend.
b.Wages expense and rent expense show a favorable trend, while supplies and miscellaneous expenses show an unfavorable trend.
c.Wages expense and rent expense show an unfavorable trend, while supplies and miscellaneous expenses show a favorable trend.</span>
d.Wages expense and supplies expense show a favorable trend, while rent and miscellaneous expenses show an unfavorable trend.
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