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	$2,740,000			100	%
Cost of goods sold	(1,479,600)			(58)
Gross profit	$1,260,400			42	%
Selling expenses	$(767,200)			(18)	%
Administrative expenses	(301,400)			(18)
Total operating expenses	$(1,068,600)			(36)	%
Operating income	$191,800			6	%
Other revenue and expense:
Other revenue	54,800			4
Other expense	(27,400)			(3)
Income before income tax	$219,200			7	%
Income tax expense	(82,200)			(3)
Net income	$137,000			4	%

Question Content Area

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 blank

	Sorenson Electronics Company Amount	Sorenson Electronics Company Percent	Electronics Industry Average
Sales	$2,740,000	fill in the blank 6be3c7fab033032_1%	100%
Cost of Goods Sold	(1,479,600)	fill in the blank 6be3c7fab033032_2%	(58)%
Gross profit	$1,260,400	fill in the blank 6be3c7fab033032_3%	42%
Selling Expenses	$(767,200)	fill in the blank 6be3c7fab033032_4%	(18)%
Administrative Expenses	(301,400)	fill in the blank 6be3c7fab033032_5%	(18)%
Total operating expenses	$(1,068,600)	fill in the blank 6be3c7fab033032_6%	(36)%
Operating income	$191,800	fill in the blank 6be3c7fab033032_7%	6%
Other revenue and expense:	blank	blank	blank
Other revenue	54,800	fill in the blank 6be3c7fab033032_8%	4%
Other expense	(27,400)	fill in the blank 6be3c7fab033032_9%	(3)%
Income before income tax	$219,200	fill in the blank 6be3c7fab033032_10%	7%
Income tax expense	(82,200)	fill in the blank 6be3c7fab033032_11%	(3)%
Net income	$137,000	fill in the blank 6be3c7fab033032_12%	4%

Question Content Area

b. Which of the following statements is true about Sorenson Electronics Company?

Sorenson's cost of goods sold is higher than the industry average.The cause of the higher selling expenses as a percent of sales, relative to the industry, should be investigated further.The cause of higher cost of goods sold as a percent of sales, relative to the industry, should be investigated.Sorenson's administrative expenses percentage are higher than the industry average.