Outdoor World, Inc., manufactures camping equipment. Shown for the current year are the income statement for the company and a common size summary for the industry in which the company operates. Outdoor World, Inc. Industry Average Sales (net) $ 20,000,000 100 % Cost of goods sold 9,800,000 58 Gross profit on sales $10,200,000 42 % Operating expenses: Selling $ 4,200,000 16 % General and administrative 3,400,000 20 Total operating expenses $7,600,000 36 % Operating income $ 2,600,000 6 % Income tax expense 1,200,000 3 Net income $1,400,000 3 % Return on assets 23 % 14% Required: a. Prepare a common size income statement. The first column should show for Outdoor World, Inc., all items expressed as a percentage of net sales. The second column has been completed and shows the equivalent industry average for the data given in the problem. The purpose of this common size statement is to compare the operating results of Outdoor World, Inc., with the average for the industry. b. If results of Outdoor World is better or worse than industry average.
Outdoor World, Inc., manufactures camping equipment. Shown for the current year are the income statement for the company and a common size summary for the industry in which the company operates. Outdoor World, Inc. Industry Average Sales (net) $ 20,000,000 100 % Cost of goods sold 9,800,000 58 Gross profit on sales $10,200,000 42 % Operating expenses: Selling $ 4,200,000 16 % General and administrative 3,400,000 20 Total operating expenses $7,600,000 36 % Operating income $ 2,600,000 6 % Income tax expense 1,200,000 3 Net income $1,400,000 3 % Return on assets 23 % 14% Required: a. Prepare a common size income statement. The first column should show for Outdoor World, Inc., all items expressed as a percentage of net sales. The second column has been completed and shows the equivalent industry average for the data given in the problem. The purpose of this common size statement is to compare the operating results of Outdoor World, Inc., with the average for the industry. b. If results of Outdoor World is better or worse than industry average.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 11E: Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant,...
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