Question

Arlington Company prepared a common-size income statement, for 2021, to corrpare its results with its key competitor, Bardo Company. Refer to the following data: m Click the icon to view the common-size income statement.) Which of the following statements can be correctly concluded from the above data? OA. Bardo places a higher priority on research and development than Arlington OB. Bardo produces higher gross margin per dollar of sales than Arlington OC. Bardo Company produced higher total not income than Arlington OD. Bardo's total operating expenses are lower than Arlington's. Common-size income statement - X Arlington Co. Bardo Co. 100.0% 100.0% 42.19 47.896 579% 52 296 Revenues Cost of goods sold Gross margin Operating expenses Sales and marketing expense General and administrative expense Research and development expense Total operating expenses 26.3% 12.0% 4.1% 42.4% 8.6% 10.8% 10.2% 29.6% Income before income tax Income tax expense Net income (s) 15.5% 3.3% 12.2% 22.8% 5.8% 16.8% Click to set your answer Print Dono Tine her

Answer 1

Answer:

Correct answer is:

A. Bardo places a higher priority on research and development than Arlington.

Explanation:

We observe that Bardo spends 10.2% of its sales on research and development as compared to 4.1% of sales spent by Arlington. From this we can conclude that Bardo places a higher priority on research and development than Arlington.

As such statement A is correct.

Statement B is incorrect since Bardo's gross margin per dollar is 52.2% as against Arlington's gross margin per dollar of 57.9%.

Statement C may not be correct since although Bardo's net income as %age to sales is higher as compared to Arlington's, net income in dollar terms would depend on actual sales volume of Bardo's as compared to actual sales volume of Arlington's.

Statement D may not be correct since although Bardo's operating expenses as %age to sales is lower as compared to Arlington's, operating expenses in dollar terms would depend on actual sales volume of Bardo's as compared to actual sales volume of Arlington's.