The Arlington Company Wishes to Compare Its Performance with Industry

question 64

Essay

The Arlington Company wishes to compare its performance with industry averages. Please refer to the data below:
$$\begin{array} { | l | r | r | } \hline & \text { Arlington Co. } & { \text { Industry } } \\\hline \text { Revenues } & \$ 8,000 & \$ 98,000 \\ \hline \text { Cost of goods sold } & \$ 3,500 & \$ 38,900 \\\hline \text { Gross Profit } & \$ 4,500 & \$ 59,100 \\\hline\text { Operating expenses: }\\\hline \text { Operating expenses: } & \$ 1,450 &\$21,000 \\\hline \text { Sales and marketing expense } & \$ 960 & \$13,900 \\\hline \text { General and administrative expense } & \$ 330 & \$ 3,880 \\\hline \text { Research and development expense } & \$ 2,740 & \$ 38,780 \\\hline \text { Total operating expenses } & &\\\hline \text { Income before income tax } & \$ 1,760 & \$ 20,320 \\\hline \text { Income tax expense } & \$ 350 &\$4,100 \\\hline \text { Net income(loss) } &\$ 1,410 & \$ 16,100\\\hline\end{array}$$
Please prepare common-sized income statement using the format below. (Round all amounts to the nearest tenth of a percent.)
$$\begin{array} { | l | l | l | } \hline & \text { Arlington Co. } & \text { Bardo Co. } \\\hline \text { Revenues } & & \\\hline \text { Cost of revenues } & & \\\hline \text { Gross Profit } & & \\\hline \text { Operating expenses: } & & \\\hline \text { Sales and marketing expense } & & \\\hline \text { General and administrative expense } & & \\\hline \text { Research and development expense } & & \\\hline \text { Total operating expenses } & & \\\hline & & \\\hline \text { Income before income tax } & & \\\hline \text { Income tax expense } & & \\\hline \text { Net income(loss) } & & \\\hline\end{array}$$

---

Definitions:

Volume-Based Costing

A costing methodology that assigns costs based primarily on the volume of goods or services produced, such as in traditional absorption costing systems.

Physical Units Method

A technique in accounting used to measure output in production or inventory in terms of the total number of units.

Joint Production Costs

Costs incurred in the process where two or more products are produced together and the costs cannot be readily assigned to individual products.

Contribution Margin

A measure of profitability calculated as sales revenue minus variable costs; used to evaluate a product's contribution to covering fixed costs.