Revenue and expense data for the current calendar year for Tannenhill Company an
ID: 2481686 • Letter: R
Question
Revenue and expense data for the current calendar year for Tannenhill Company and for the electronics industry are as follows. The Tannenhill Company data are expressed in dollars. The electronics industry averages are expressed in percentages. 1 Tannenhill Company Electronics Industry Average 2 Sales $4,060,000.00 100.0% 3 Cost of goods sold 2,111,200.00 58.0 4 Gross profit $1,948,800.00 42.0% 5 Selling expenses $1,055,600.00 23.0% 6 Administrative expenses 649,600.00 14.0 7 Total operating expenses $1,705,200.00 37.0% 8 Income from operations $243,600.00 5.0% 9 Other income 211,600.00 2.9 10 $455,200.00 7.9% 11 Other expense 72,000.00 1.8 12 Income before income tax $383,200.00 6.1% 13 Income tax expense 78,000.00 1.9 14 Net income $305,200.00 4.2% Required: A. Prepare a common-sized income statement comparing the results of operations for Tannenhill Company with the industry average. Enter all amounts as positive numbers. Round percentages to one decimal place. B. As far as the data permit, comment on significant relationships revealed by the comparisons.
Explanation / Answer
A)
B)
The percentage of cost of goods sold of the company is less than the industry average. This implies, the company is controlling the cost of production in a far better way than the prevailing standard of the industry. The better performance of the company than the industry average is reflected in better percentage of gross profit .
Total operating expense for the company is 42% of sales for the company in comparison to 37% industry average. This implied the company has failed to control the operating expenses efficiently as expected by the industry average. The advantage of better production management of the company has been adversely affected by the inefficient management of operating expenses, thereby reducing the gain in gross profit percentage from 6% to only 1% in its net profit.
The income from other sources is less for the company than the industry average.
Overall the company is doing great so far as the control of cost of production is concerned while, for operating expenses it is required to take some effective measures to reduce the operating expenses in the forthcoming days.
Particulars Tannenhill Company Inductry average Amount ($) % of sales Sales 4060000 100.00% 100.00% cost of goods sold 2111200 52.00% 58.00% gross profit 1948800 48.00% 42.00% selling expenses 1055600 26.00% 23.00% administrative expenses 649600 16.00% 14.00% Total operating expenses 1705200 42.00% 37.00% income from operations 243600 6.00% 5.00% other income 211600 5.21% 2.90% Total income 455200 11.21% 7.90% other expenses 72000 1.77% 1.80% Income before income tax 383200 9.44% 6.10% income tax expense 78000 1.92% 1.90% Net income 305200 7.52% 4.20%Related Questions
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