Question

The average price of a gallon of gas in 2013 dropped $0.12 (3 percent) from $3.61 in 2012 (to $3.49 in 2013).

Required:

1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Chevron Corporation for the year ended December 31, 2013 (amounts in billions). (Decreases should be indicated by a minus sign. Enter your answers in billions (i.e., 10,000,000,000 should be entered as 10). Round your percentage answers to 1 decimal place.)

	CHEVRON CORPORATION Income Statements (dollars in billions) For the Year Ended December 31 Change in 2013 2012 Dollars Percentage Total Revenues $225 $242 % Costs of Crude Oil and Products 119 127 % Other Operating Costs 59 52 % Income before Income Tax Expense 47 63 % Income Tax Expense 21 26 % Net Income $26 $37 %

2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. (Round your percentage answers to 1 decimal place.)

	CHEVRON CORPORATION Income Statements (dollars in billions) For the Year Ended December 31 2013 2012 Total Revenues $225    % $242 % Costs of Crude Oil and Products 119 % 127 % Other Operating Costs 59 % 52    % Income before Income Tax Expense 47 % 63 % Income Tax Expense 21 % 26 % Net Income $26 % $37 %

2-b. Excluding income tax and other operating costs, did Chevron earn more profit per dollar of revenue in 2013 compared to 2012?

	Yes
	No

Answer 1

Answer:
1

2

2-b
Excluding income tax and other operating costs, did Chevron earn more profit per dollar of revenue in 2013 compared to 2012?
Answer: NO
Explanation to the answer:
As a percent of revenues, Chevron’s cost of crude oil and products was higher in 2013 (52.89%) than in 2012 (52..48%). This implies that Chevron earned less profit (excluding income tax and other operating costs) per dollar of revenues in 2013 than in 2012.