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  3. a) the following data were drawn from the accounti

A) The following data were drawn from the accounting records of Fox Company. ...

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Question

Accounting

A) The following data were drawn from the accounting records of Fox Company.

Year 2 Year 1
Revenue $ 120,000 $ 100,000
Operating Expenses 78,000 60,000
Net Income 42,000 40,000

If the year to year trends shown in these data continue

Multiple Choice

a.revenue for Year 3 will be $144,000.

b.operating expenses for Year 3 will be $101,400.

c.net income for Year 3 will be $42,600.

d.All of the answers are correct.

B).The following information was drawn from the records of Milan Company.

Year 2 Year 1
Revenue $ 120,000 $ 100,000
Cost of goods sold (78,000 ) (60,000 )
Gross Margin 42,000 40,000
Operating Expenses (24,000 ) (20,000 )
Net Income $ 18,000 $ 20,000

Vertical analysis suggests that the most likely explanation as to why net income decreased is

Multiple Choice

a.the company was unable to pass on increases in the cost of its good to its customers.

b. the company was unable to pass on increases in the operating expenses to its customers.

c. Both explanations are rational.

d. Neither explanation is rational.

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