The Following Is a Summary of Information Presented on the Financial

question 117

Multiple Choice

The following is a summary of information presented on the financial statements of a company on December 31, 2019. $$\begin{array} { | l | r | r | } \hline \text { Account } & { \mathbf { 2 0 1 9 } } & { \mathbf { 2 0 1 8 } } \\\hline \text { Net Sales Revenue } & \$ 600,000 & \$ 504,000 \\\hline \text { Cost of Goods Sold } & \underline { 456,000 } & \underline { 405,000 } \\\hline \text { Gross Profit } & \$ 144,000 & \$ 99,000 \\\hline \text { Selling Expenses } & \underline { 51,000 } & \underline { 54,000 } \\\hline \text { Net Income Before Income Tax Expense } & \$ 93,000 & \$ 45,000 \\\hline \text { Income Tax Expense } & \underline { 39,000 } & \underline { 23,000 } \\\hline \text { Net Income } & \$ 54,000 & \$ 22,000 \\\hline\end{array}$$ With respect to net income, a horizontal analysis reveals ________. (Round your answer to two decimal places.)

• A) that net income is 14.55% of net sales revenue
• B) a $22,000 increase in net income
• C) a 145.45% decrease in net income
• D) a 145.45% increase in net income

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Definitions:

Unit Product Cost

The cumulative expense of manufacturing a single product unit, encompassing direct materials, direct labor, and overhead costs related to production.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, calculated before the actual costs are known, based on estimated costs.

Overhead Rate

A measure used to allocate overhead costs to products or services, often calculated by dividing total overheads by a base measure such as labor hours or machine hours.

Estimated Labor-Hours

The projected number of labor hours required to complete a batch of goods or provide a service.