Arlington Company Has Prepared the Following Common-Size Income Statement to Compare

question 89

Multiple Choice

Arlington Company has prepared the following common-size income statement to compare its performance with industry averages:
$$\begin{array} { | l | r | r | } \hline & \text { Arlington Co. } & \text { Industry } \\\hline \text { Revenues } & 100.0 \% & 100.0 \% \\\hline \text { Cost of sales } & 43.8 \% & 39.7 \% \\\hline \text { Gross profit } & 56.2 \% & 60.3 \% \\\hline \text { Selling and general expenses: } & & \\\hline \text { Sales and marketing expense } & 18.1 \% & 21.4 \% \\\hline \text { General and administrative expense } & 12.0 \% & 14.2 \% \\\hline \text { Research and development expense } & 4.1 \% & 4.0 \% \\\hline \text { Total selling and general expenses } & 34.2 \% & 39.6 \% \\\hline & & \\\hline \text { Profit before tax } & 22.0 \% & 20.7 \% \\\hline \text { Income taxexpense } & 4.4 \% & 4.2 \% \\\hline \text { Profit (loss) } & 17.6 \% & 16.5 \% \\\hline\end{array}$$
Which of the following statements can be correctly concluded from the above data?

• A) Arlington achieves better results than the industry by earning higher revenues.
• B) Arlington achieves better profitability than the industry, primarily by controlling selling and general expenses more effectively.
• C) Arlington's profit is higher than the industry average.
• D) Arlington's gross profit per dollar of sales is higher than the industry average.

---

Definitions:

Discriminate

To discriminate means to unjustly treat people differently, especially on the grounds of race, age, sex, or disability.

Substantially Equal Work

Work that is essentially the same in terms of skill, effort, and responsibility, and performed under similar working conditions, requiring equal pay.

Religion

A system of beliefs, values, rituals, and worship associated with the veneration of a higher power, supernatural forces, or deities.

Federal Unemployment

Government-provided benefits given to individuals who have lost their jobs, not due to their own fault, to help them financially during their job search.