Ex 14-3 Objective 2 data for the current calendar year for Tannenhill Company a

Question

Ex 14-3 Objective 2 data for the current calendar year for Tannenhill Company a and for the electronics industry are as follows. T a are expressed in dollars. The electronics industry averages are Revenue and expense Tannenhill Company Electronics Industry Average Sales Cost of goods sold Gross profit Selling expenses Administrative Total operating expenses Operating income 100.0% $4,000,000 2,120,000 $1,880,000 $1,080,000 640,000 S1,720,000 5160,000 120,000 S 280,000 80,000 S 200,000 80,000 S 120,000 60.0 40 0% 24.0% 14.0 380% 2.0% 3.0 Other income 5.0% Other expense Income before income tax income tax Net income 2.0 3,0% 2.0 1.0% expense a common-sized income statement comparing the results of operations for Tannenhill Company with the industry average. (Round to the nearest whole percentage.) A Prepare B. As far as the data pemit, comment on significant relationships revealed by the comparisons.

Explanation / Answer

(1) Tennenhill company had done better than Industry with lower cost of goods sold and higher gross profit margin rates.

(2) But the company is not successfull in controlling the the operating expenses compared with industry standards. As a result, strength in higher gross profits cannot be continued in operating profits. However operating profit ratio is still better for Tennenhill company

(3) Other Incomes are on betterside for this company. Thus net income is also above the industry average.

The overall impression indicates Tennenhill company is above industry average. If operating expenses are kept under control, there is still scope to improve upon the net Income for this company.

Amount TC Industry Sales 4000000 100 100 (-) Cost of goods sold 2120000 53 60 Gross profit 1880000 47 40 Selling expenses 1080000 27 24 Administrative expenses 640000 16 14 Total operating expenses 1720000 43 38 Operating Income 160000 4 2 Other Income 120000 3 3 280000 7 5 Other expenses 80000 2 2 Income before tax 200000 5 3 Income tax expenses 80000 2 2 Net Income 120000 3 1

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