Use the Following Information to Do a Horizontal Analysis of Magic

question 97

Multiple Choice

Use the following information to do a horizontal analysis of Magic Corporation's income statement for the current year and prior year: $$\begin{array} { | l | l | l | l | l | } \hline \text { Account } & \text { Current year } & \text { Priar year } & \text { Dollar Change } & \text { \% Change } \\\hline \text { Cost af good sold } & \$ 375,000 & \$ 300,000 & & \\\hline \text { Selling/general exp } & \$ 60,000 & \$ 40,000 & & \\\hline \text { Gross prafit } & \$ 102,600 & \$ 76,000 & & \\\hline \text { Net incarne } & \$ 17,600 & \$ 22,000 & & \\\hline\end{array}$$
- What is the dollar change in selling/general expenses?

• A)$100,000
• B)$75,000
• C)$(4,400)
• D)$20,000

---

Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a business.

Total Cost

Total cost refers to the aggregate sum of all costs, both fixed and variable, incurred by a business in producing goods or services.

Fixed Cost

Fixed cost is an expense that does not change with the level of production or sales, such as salaries, rent, and insurance.

Variable Cost

Costs that change directly with the level of production or service output.