Question

McHale Company does business in two customer segments, Retail and Wholesale. The following annual revenue information was determined from the accounting system's invoice information:

	20Y5		20Y4
Retail	$281,820		$268,400
Wholesale	147,576		171,600
Total revenue	$429,396		$440,000

Prepare a horizontal analysis of the segments. Round percentages to one decimal place. Enter negative values as negative numbers.

McHale Company
Horizontal Analysis
For the Years 20Y4 and 20Y5
	20Y5	20Y4	Difference - Amount	Difference - Percent
Retail	$281,820	$268,400	$	%
Wholesale	147,576	171,600		%
Total revenue	$429,396	$440,000	$	%

Prepare a vertical analysis of the segments. If required, round percentages to one decimal place.

McHale Company
Vertical Analysis
For the Years 20Y4 and 20Y5
	20Y5 Amount	20Y5 Percent	20Y4 Amount	20Y4 Percent
Retail	$281,820	%	$268,400	%
Wholesale	147,576	%	171,600	%
Total revenue	$429,396	%	$440,000	%

Answer 1

Solution:                                              Horizontal Analysis

McHale Company
Horizontal Analysis
For the Years 20Y4 and 20Y5
	20Y5	20Y4	Difference – Amount (WN1)	Difference – Percent (WN 2)
Retail	$281,820	$268,400	$ 13,420	5.0 %
Wholesale	147,576	171,600	-$ 24,024	- 14.0 %
Total revenue	$429,396	$440,000	- $ 10,604	-2.4 %

Working Notes (WN):

(1) Difference – Amount:

Note: 20Y5 is considered as current year and 20Y4 is taken as base year.

Formula = Current year amount (20Y5) - Base year amount (20Y4)

Retail: $281,820 - $268,400 = $ 13,420

Wholesale: $ 147,576- $ 171,600= -$ 24,024

Total revenue: $429,396 - $440,000= - $ 10,604

(2) Difference – Percent:

Note: 20Y5 is considered as current year and 20Y4 is taken as base year.

Formula = Difference Amount / Base year amount (20Y4) X 100

Retail: $ 13,420/ $268,400 X 100 = 5.0 %

Wholesale: -$ 24,024/ $ 171,600 X 100 = - 14.0 %

Total revenue: - $ 10,604/ $440,000 X 100 = -2.4 %

Vertical Analysis

McHale Company
Vertical Analysis
For the Years 20Y4 and 20Y5
	20Y5 Amount	20Y5 Percent	20Y4 Amount (WN 1)	20Y4 Percent (WN 2)
Retail	$281,820	65.6 %	$268,400	61 %
Wholesale	147,576	34.4 %	171,600	39 %
Total revenue	$429,396	100 %	$440,000	100 %

Note: In vertical analysis, the total amount is taken as 100% and rest of the amount are expressed in percentage on the basis of that total amount.

In the above question total revenue is taken as 100% and amount of retail and wholesale are expressed in percentage on the basis of that total revenue amount.

(1) 20Y5 Percent:

Retail: $281,820 / $429,396 X 100 = 65.6 %

Wholesale: $ 147,576/ $429,396 X 100 = 34.4 %

Total revenue: $429,396 / $429,396 X 100 = 100 %

(2) 20Y4 Percent:

Retail: $268,400 / $440,000 X 100 = 65.6 %

Wholesale: $ 171,600 / $440,000 X 100 = 34.4 %

Total revenue: $440,000 / $440,000 X 100 = 100 %