Stella Ltd Using a Vertical Trend Analysis with Net Sales as a from 2020

question 8

Multiple Choice

Stella Ltd. has provided you with the following selected information from 2020 and 2021: $$\begin{array} { l r r } &2021&2020 \\\hline\text { Sales } &{ \$ } &{ \$740,000 } \\ & 785,000 & \\\text { Sales returns and allowances } & 55,200 & 52,000 \\\text { Cost of goods sold } & 358,000 & 305,000 \\\text { Operating expenses } & 285,000 & 255,000 \\\text { Profit } & 86,800 & 128,000\end{array}$$ Using a vertical trend analysis with net sales as a base, which of the following most accurately depicts the information stated above?

• A) Profit as a percentage of net sales decreased by 6.7 percentage points.
• B) Cost of goods sold as a percentage of net sales decreased by 5 percentage points.
• C) Profit as a percentage of net sales did not change significantly from 2020.
• D) Cost of goods sold as a percentage of net sales remained consistent from 2020.

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