Question - Revenue and expense data for the current calendar year for Sorenson Electronics Company and for the electronics industry are as follows. The Sorenson Electronics Company data are expressed in dollars. The electronics industry averages are expressed in percentages.
Sorenson Electronics Company Electronics Industry
Average
Sales $2,050,000 102.5%
Sales returns and allowances 50,000 2.5
Net sales $2,000,000 100.0%
Cost of goods sold 1,100,000 61.0
Gross profit $ 900,000 39.0%
Selling expenses $ 560,000 23.0%
Administrative expenses 220,000 10.0
Total operating expenses $ 780,000 33.0%
Operating income $ 120,000 6.0%
Other income 44,000 2.2
$ 164,000 8.2%
Other expense 20,000 1.0
Income before income tax $ 144,000 7.2%
Income tax expense 60,000 5.0
Net income $ 84,000 2.2%
a. Prepare a common-sized income statement comparing the results of operations for Sorenson Electronics Company with the industry average. Round to one decimal place.
b. As far as the data permit, comment on significant relationships revealed by the comparisons.