In: Accounting
Marta Enterprise is a large corporation that had business activities in such areas as building, maintenance services, real-estate investment, and truck leasing and auto parts distribution. The following selected data was obtained from the company’s comparative income statements and statements of financial position.
Income Statements Data For the Year ended |
||
31/12/ YEAR 2 |
31/12/YEAR 1 |
|
Ksh. ‘000’ |
Kshs. ‘000’ |
|
Net sales |
97,000 |
82,000 |
Cost of goods sold |
57,500 |
47,500 |
Selling expenses |
14,000 |
12,000 |
Administrative expenses |
16,500 |
15,000 |
Interest expense on long-term debt |
1,500 |
2,100 |
Statement of Financial Position |
||
31/12/ YEAR 2 |
31/12/YEAR 1 |
|
Ksh. ‘000’ |
Ksh. ‘000’ |
|
Cash |
127,000 |
119,500 |
Short-term investments |
52,500 |
68,000 |
Inventories |
18,000 |
14,000 |
Pre-paid expenses |
79,000 |
65,500 |
Total current liabilities |
3,500 |
5,000 |
Long-term debt |
112,000 |
107,500 |
15,000 |
21,500 |
At the beginning of year 2, top management implemented a firm-wide cost control program aimed at selling and administrative expenses. The company rounds all computations to one decimal place and has no cash sales.
Required:
Vertical analysis of selling and administrative expenses of Marta Enterprise for year 1 and year 2
Particulars |
year 2 Ksh.'000' |
Year 2 Percentage |
Year 1 Ksh. '000' |
Year 1 Percentage |
Net sales | 97,000 | 100% | 82,000 | 100% |
Selling expenses | 14,000 | 14.43% | 12,000 | 14.63% |
Administrative expenses | 16,500 | 17% | 15,000 | 18.29% |
Selling expenses percentage in year 2
= (14,000 / 97,000) × 100 = 14.43%
Selling expenses percentage in year 1
= (12,000 / 82,000) × 100 = 14.63%
Administrative expenses percentage in year 2
= (16,500 / 97,000) × 100 = 17%
Administrative expenses percentage in year 1
= (15,000 / 82,000) × 100 = 18.29%
* The selling expenses in year 1 is 14.63% and in year 2 is 14.43%. Selling expenses is down by .2% as compared year 2 to year 1.
* The administrative expenses in year 1 is 18.29% and year 2 is 17% . It reduced by 1.29%
The cost control program are work well . Because the selling expenses and administrative expenses are down compared to each year sales in year 2 as compared to year 1.
I
The above are the detailed calculations and explanations.
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