Exercise 9-3

Name:
Section:

Score: 100%

Key Code: 2
Instructions
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a.
LYONS ELECTRONICS COMPANY
Common-Size Income Statement

Electronics
Lyons Industry
Electronics Company Average
Amount Percent

Sales $ 7,500,000 100.0% 100.0%

Cost of goods sold (4,125,000) -55.0% -61.0%
Gross profit $ 3,375,000 45.0% 39.0%
Selling expenses $ (2,250,000) -30.0% -23.0%
Administrative expenses (525,000) -7.0% -10.0%
Total operating expenses $ (2,775,000) -37.0% -33.0%
Operating income $ 600,000 8.0% 6.0%
Other revenue and expense:
Other revenue 30,000 0.4% 3.0%
Other expense (7,500) -0.1% -1.0%
Income before income tax $ 622,500 8.3% 8.0%
Income tax expense (187,500) -2.5% -2.5%
Net income $ 435,000 5.8% 5.5%

b. COGS is lower than average, but total operating expenses are higher. Overall, the company is slightly more
profitable than average.
slightly more