Question

Common-Sized Income Statement

Revenue and expense data for the current calendar year for Sorenson Electronics Company and for the electronics industry are as follows. Sorenson Electronics Company data are expressed in dollars. The electronics industry averages are expressed in percentages.

	Sorenson Electronics Company			Electronics Industry Average
Sales	$2,360,000			100	%
Cost of goods sold	(1,298,000)			(61)
Gross profit	$1,062,000			39	%
Selling expenses	$(637,200)			(17)	%
Administrative expenses	(259,600)			(16)
Total operating expenses	$(896,800)			(33)	%
Operating income	$165,200			6	%
Other revenue and expense:
Other revenue	47,200			4
Other expense	(23,600)			(3)
Income before income tax	$188,800			7	%
Income tax expense	(70,800)			(5)
Net income	$118,000			2	%

a. Prepare a common-sized income statement comparing the results of operations for Sorenson Electronics Company with the industry average. If required, round percentages to one decimal place.

Sorenson Electronics Company
Common-Sized Income Statement
	Sorenson Electronics Company Amount	Sorenson Electronics Company Percent	Electronics Industry Average
Sales	$2,360,000	%	100%
Cost of Goods Sold	(1,298,000)	%	(61)%
Gross profit	$1,062,000	%	39%
Selling Expenses	$(637,200)	%	(17)%
Administrative Expenses	(259,600)	%	(16)%
Total operating expenses	$(896,800)	%	(33)%
Operating income	$165,200	%	6%
Other revenue and expense:
Other revenue	47,200	%	4%
Other expense	(23,600)	%	(3)%
Income before income tax	$188,800	%	7%
Income tax expense	(70,800)	%	(5)%
Net income	$118,000	%	2%

Answer 1

Sorenson Electronics Company
Common-Sized Income Statement
	Sorenson Electronics	Sorenson Electronics	Electronics Industry
	Company Amount	Company Percent	Average
Sales	$2,360,000	100%	100%
Cost of Goods Sold	-1,298,000	(55)%	(61)%
Gross profit	$1,062,000	45%	39%
Selling Expenses	($637,200)	(27)%	(17)%
Administrative Expenses	(259,600)	(11)%	(16)%
Total operating expenses	($896,800)	(38)%	(33)%
Operating income	$165,200	7%	6%
Other revenue and expense:
Other revenue	47,200	2%	4%
Other expense	(23,600)	(1)%	(3)%
Income before income tax	$188,800	8%	7%
Income tax expense	(70,800)	(3)%	(5)%
Net income	$118,000	5%	2%