McHale Company does business in two customer segments, Retail and Wholesale. The
ID: 2410168 • Letter: M
Question
McHale Company does business in two customer segments, Retail and Wholesale. The following annual revenue information was determined from the accounting system's invoice information:
Prepare a horizontal analysis of the segments. Round percentages to one decimal place. Enter negative values as negative numbers.
Prepare a vertical analysis of the segments. If required, round percentages to one decimal place.
20Y5 20Y4 Retail $281,820 $268,400 Wholesale 147,576 171,600 Total revenue $429,396 $440,000Explanation / Answer
Solution: Horizontal Analysis
McHale Company
Horizontal Analysis
For the Years 20Y4 and 20Y5
20Y5
20Y4
Difference – Amount (WN1)
Difference – Percent (WN 2)
Retail
$281,820
$268,400
$ 13,420
5.0 %
Wholesale
147,576
171,600
-$ 24,024
- 14.0 %
Total revenue
$429,396
$440,000
- $ 10,604
-2.4 %
Working Notes (WN):
(1) Difference – Amount:
Note: 20Y5 is considered as current year and 20Y4 is taken as base year.
Formula = Current year amount (20Y5) - Base year amount (20Y4)
Retail: $281,820 - $268,400 = $ 13,420
Wholesale: $ 147,576- $ 171,600= -$ 24,024
Total revenue: $429,396 - $440,000= - $ 10,604
(2) Difference – Percent:
Note: 20Y5 is considered as current year and 20Y4 is taken as base year.
Formula = Difference Amount / Base year amount (20Y4) X 100
Retail: $ 13,420/ $268,400 X 100 = 5.0 %
Wholesale: -$ 24,024/ $ 171,600 X 100 = - 14.0 %
Total revenue: - $ 10,604/ $440,000 X 100 = -2.4 %
Vertical Analysis
McHale Company
Vertical Analysis
For the Years 20Y4 and 20Y5
20Y5 Amount
20Y5 Percent
20Y4 Amount
(WN 1)
20Y4 Percent (WN 2)
Retail
$281,820
65.6 %
$268,400
61 %
Wholesale
147,576
34.4 %
171,600
39 %
Total revenue
$429,396
100 %
$440,000
100 %
Note: In vertical analysis, the total amount is taken as 100% and rest of the amount are expressed in percentage on the basis of that total amount.
In the above question total revenue is taken as 100% and amount of retail and wholesale are expressed in percentage on the basis of that total revenue amount.
(1) 20Y5 Percent:
Retail: $281,820 / $429,396 X 100 = 65.6 %
Wholesale: $ 147,576/ $429,396 X 100 = 34.4 %
Total revenue: $429,396 / $429,396 X 100 = 100 %
(2) 20Y4 Percent:
Retail: $268,400 / $440,000 X 100 = 65.6 %
Wholesale: $ 171,600 / $440,000 X 100 = 34.4 %
Total revenue: $440,000 / $440,000 X 100 = 100 %
McHale Company
Horizontal Analysis
For the Years 20Y4 and 20Y5
20Y5
20Y4
Difference – Amount (WN1)
Difference – Percent (WN 2)
Retail
$281,820
$268,400
$ 13,420
5.0 %
Wholesale
147,576
171,600
-$ 24,024
- 14.0 %
Total revenue
$429,396
$440,000
- $ 10,604
-2.4 %