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 $4,000,000 100%
3 Cost of goods sold $2,120,000 60%
4 Gross profit $1,888,000 40%
5 Selling expenses $1,080,000 24%
6 Administrative expenses $640,000 14%
7 Total operating expenses $1,720,000 38%
8 Income from operations $160,000 2%
9 Other income $120,000 3%
10 $280,000 5%
11 Other expense $80,000 2%
12 Income before income tax $200,000 3%
13 Income tax expense $80,000 2%
14 Net income $120,000 1%
A. Prepare a common-size income statement comparing the results of operations for Tannenhill Company with the industry average. Enter all amounts as positive numbers.

B. As far as the data permit, comment on significant relationships revealed by the comparisons. As far as the data permit, comment on significant relationships revealed by the comparisons.

Answer 1

Step-by-step explanation:

Tannenhill % Industry

Sales 4,000,000 100 100

Cost of goods 2,120,000 53 60

Gross profit 1,880,000 47 40

Selling Expenses 1,080,000 27 24

Admin Expenses 640,000 16 14

Operating Expenses 1,720,000 43 38

Operating profit 160,000 4 2

Other income 120,000 3 3

Total income 280,000 7 5

Other Expenses 80,000 2 2

Income before tax 200,000 5 3

Income tax 80,000 2 2

Net Income 120,000 3 1

B)

Despite the fact that the selling and admin expenses pf Tannenhill was higher than the industry average , it had a better performance in the cost of goods management which in effect caused Tannenhill to record a greater net income percentage compared to the industry performance.

The other income and expenses was the same with the industry average , hence no impact on the overall performance.