The Arlington Company Prepared a Common-Size Income Statement to Compare

Multiple Choice

The Arlington Company prepared a common-size income statement to compare its results with its key competitor,Bardo Company.Please refer to the following data: $\begin{array}{|l|r|r|} \hline& \text { Arlington Co. } &{\text { Bardo Co. }} \\\hline \text { Revenues } & 100.0 \% & 100.0 \% \\\hline \text { Cost of sales } & 42.1 \% & 47.8 \% \\\hline \text { Gross profit } & 57.9 \% & 52.2 \% \\\hline \text { Selling and general expenses: } & &\\\hline \text { Sales and marketing expense } & 26.3 \% & 8.6 \% \\\hline \text { General and administrative expense } & 12.0 \% & 10.8 \% \\\hline \text { Research and development expense } & 4.1 \% & 10.2 \% \\\hline \text { Total selling and general expenses } & 42.4 \% & 29.6 \% \\\hline & & \\\hline \text { Profit before tax } & 15.5 \% & 22.6 \% \\\hline \text { Income tax expense } & 3.3 \% & 5.8 \% \\\hline \text { Profit (loss) } & 12.2 \% & 16.8 \% \\\hline\end{array}$ Which of the following statements can be correctly concluded from the above data?

A) Arlington's cost of sales is lower than Bardo's on a per unit basis.
B) Arlington makes less total profit than Bardo.
C) Arlington produces a higher amount of gross profit than Bardo.
D) Bardo has more effective cost control than Arlington in the area of selling and general expenses.