Decor, Inc., manufactures bathroom equipment. Shown below for the current year are the income statements for the company and a common size summary for the industry in which the company operates. (The percentages in the right-hand column are not for Decor, Inc., but are average percentages for the industry.)
Comparing Operating Results with Average Performance in the Industry:
a. Prepare a two-column common size income statement for Decor, Inc. The first column should show for Decor, Inc., all items expressed as a percentage of net sales. The second column should show 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 Decor, Inc., with the average for the industry. (Round to the nearest percent.)
b. Comment specifically on differences between Decor, Inc., and the industry average with respect to gross profit on sales, selling expenses, general and administrative expenses, operating income, net income, and return on assets. Suggest possible reasons for the more important disparities?