Horizontal Analysis of the Income Statement

Income statement data for Winthrop Company for two recent yearsended December 31, are as follows:

	CurrentYear			PreviousYear
Sales	$736,600			$580,000
Cost of goods sold	607,600			490,000
Gross profit	$129,000			$90,000
Selling expenses	$37,440			$32,000
Administrative expenses	33,750			27,000
Total operating expenses	$71,190			$59,000
Income before income tax	$57,810			$31,000
Income tax expenses	23,100			12,400
Net income	$34,710			$18,600

a. Prepare a comparative income statement withhorizontal analysis, indicating the increase (decrease) for thecurrent year when compared with the previous year. If required,round to one decimal place.

Winthrop Company
Comparative Income Statement
For the Years Ended December 31
	Current year Amount	Previous year Amount	Increase (Decrease) Amount	Increase (Decrease) Percent
Sales	$736,600	$580,000	$	%
Cost of goods sold	607,600	490,000		%
Gross profit	$129,000	$90,000	$	%
Selling expenses	$37,440	$32,000	$	%
Administrative expenses	33,750	27,000		%
Total operating expenses	$71,190	$59,000	$	%
Income before income tax	$57,810	$31,000	$	%
Income tax expense	23,100	12,400		%
Net income	$34,710	$18,600	$	%

b. The net income for Winthrop Companyincreased between years. This increase was the combined result ofan ___ in sales and  percentage ____ in cost of goodssold. The cost of goods sold increased at a ___ rate than theincrease in sales, thus causing the percentage increase in grossprofit to be   than the percentage increase insales.