Question

Common-Sized Income Statement Revenue and expense data for the current calendar year for Tannenhill Company and for the electronics industry are as follows. Tannenhill’s data are expressed in dollars. The electronics industry averages are expressed in percentages. Tannenhill Company Electronics Industry Average Sales $770,000 100 % Cost of goods sold 415,800 59 Gross profit $354,200 41 % Selling expenses $223,300 25 % Administrative expenses 84,700 10 Total operating expenses $308,000 35 % Operating income $46,200 6 % Other income 15,400 2 $61,600 8 % Other expense 7,700 1 Income before income tax $53,900 7 % Income tax expense 23,100 5 Net income $30,800 2 % a. Prepare a common-sized income statement comparing the results of operations for Tannenhill Company with the industry average. If required, round percentages to one decimal place. Enter all amounts as positive numbers. Tannenhill Company Common-Sized Income Statement For the Year Ended December 31 Tannenhill Company Amount Tannenhill Company Percent Electronics Industry Average Sales $770,000 % 100.0% Cost of goods sold 415,800 % 59% Gross profit $354,200 % 41% Selling expenses $223,300 % 25% Administrative expenses 84,700 % 10% Total operating expenses $308,000 % 35% Operating income $46,200 % 6% Other income 15,400 % 2% $61,600 % 8% Other expense 7,700 % 1% Income before income tax $53,900 % 7% Income tax expense 23,100 % 5% Net income $30,800 % 2% Feedback a. Show each item as a percentage of net sales. Learning Objective 2 b. The company is managing the cost of manufacturing product as well as or better than the industry, and has slightly higher selling and administrative expenses relative to the industry. The combined impact causes net income as a percent of sales to be better than the industry average. Feedback b. Consider the relationship of each account to net sales and how it relates to the industry numbers. Learning Objective 2 Feedback Partially correct Check My Work1 more Check My Work uses remaining. PreviousNext

Answer 1

a.

Tannenhill Company
Common-Sized Income Statement
For the Year Ended December 31
	Tannenhill Company		Electronics Industry Average
	Amount	Percent
Sales	770000	100%	100%
Cost of goods sold	415800	54%	59%
Gross profit	354200	46%	41%
Selling expenses	223300	29%	25%
Administrative expenses	84700	11%	10%
Total operating expenses	308000	40%	35%
Operating income	46200	6%	6%
Other income	15400	2%	2%
	61600	8%	8%
Other expense	7700	1%	1%
Income before income tax	53900	7%	7%
Income tax expense	23100	3%	5%
Net income	30800	4%	2%

b. The company is managing the cost of manufacturing product better than the industry, and has slightly higher selling and administrative expenses relative to the industry. The combined impact causes net income as a percent of sales to be better than the industry average.