Question

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

	Dawg Electronics Company			Electronics Industry Average
Sales	$ 3,750,000			100	%
Cost of goods sold	(2,062,500)			(61.0)
Gross profit	$1,687,500			39.0	%
Selling expenses	$(1,125,000)			(23.0)	%
Administrative expenses	(262,500)			(10.0)
Total operating expenses	$(1,387,500)			(33.0)	%
Operating income	$300,000			6.0	%
Other revenue and expense:
Other revenue	15,000			3.0
Other expense	$(3,750)			(1.0)
Income before income tax	$ 311,250			8.0	%
Income tax expense	(93,750)			(2.5)
Net income	$217,500			5.5	%

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

Dawg Electronics Company
Common-Sized Income Statement
	Dawg Electronics Company Amount	Dawg Electronics Company Percent	Electronics Industry Average
Sales	$3,750,000	%	100.0%
Cost of goods sold	(2,062,500)	%	(61.0)%
Gross profit	$1,687,500	%	39.0%
Selling expenses	$(1,125,000)	%	(23.0)%
Administrative expenses	(262,500)	%	(10.0)%
Total operating expenses	$(1,387,500)	%	(33.0)%
Operating income	$300,000	%	6.0%
Other revenue and expense:
Other revenue	15,000	%	3.0%
Other expense	(3,750)	%	(1.0)%
Income before income tax	$311,250	%	8.0%
Income tax expense	(93,750)	%	(2.5)%
Net income	$217,500	%	5.5%

Answer 1

Common-Sized Income Statement
	Dawg Electronics	Dawg Electronics	Electronics Industry
Company Amount	Company Percent	Average
Sales	$      3,750,000	100.0%	100.0%
Cost of goods sold	$    (2,062,500)	-55.0%	-61.0%
Gross profit	$      1,687,500	45.0%	39.0%
Selling expenses	$    (1,125,000)	-30.0%	-23.0%
Administrative expenses	$       (262,500)	-7.0%	-10.0%
Total operating expenses	$    (1,387,500)	-37.0%	-33.0%
Operating income	$         300,000	8.0%	6.0%
Other revenue and expense:
Other revenue	$           15,000	0.4%	3.0%
Other expense	$ (3,750)	-0.1%	-1.0%
Income before income tax	$         311,250	8.3%	8.0%
Income tax expense	$ (93,750)	-2.5%	-2.5%
Net income	$         217,500	5.8%	5.5%