The Following Is a Summary of Information Presented on the Financial

question 51

Essay

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2014.
What would horizontal analysis report with respect to net income before income tax expense and net income?
A)That both net income before income tax expense and net income are 45.45% of net sales revenue
B)A $25,000 increase in both net income before income tax expense and net income
C)A 45.45% increase in both net income before income tax expense and net income
D)A 145% increase in both net income before income tax expense and net income

• A)That both net income before income tax expense and net income are 45.45% of net sales revenue
• B)A $25,000 increase in both net income before income tax expense and net income
• C)A 45.45% increase in both net income before income tax expense and net income
• D)A 145% increase in both net income before income tax expense and net income

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Definitions:

Average Total Cost

The total cost of production divided by the quantity of output produced, representing the cost per unit of production.

Fixed Cost

Costs that do not change with the level of output or production, such as rent, salaries, and insurance.

Market Price

The actual selling price of a good or service in the marketplace at any given time.

Marginal Revenue

The increase in income a business achieves through the sale of one extra unit of a product or service.