Northland Enterprises sells and services snowmobiles and other recreational vehicles, and has reported the following revenues and expenses for the year ended December 31, 2011:
Sales of recreational vehicles………………………………..$6,000,000
Sales of replacement parts…………………………………... 800,000
Revenue from repair work (parts and labour)………………. 1,100,000
Interest earned on investments……………………………… 40,000
Cost of recreational vehicles sold…………………………… 3,400,000
Cost of replacement parts sold………………………………. 490,000
Cost of labour and parts used for repair work……………….. 400,000
Shipping and delivery costs………………………………….. 280,000
Selling and administrative salaries…………………………… 450,000
Other operating expenses…………………………………….. 500,000
Interest expense on mortgage………………………………… 70,000
Loss on sale of old equipment………………………………... 10,000
Income tax expense…………………………………………… 740,000
Required:
a. Prepare a 2011 statement of earnings for Northland Enterprises in a format that you think will be useful for management analysis.
b. Which aspect of the company's operations (sales of recreational vehicles, sales of replacement parts, or repair work) seems to be the most profitable?
c. In 2010, Northland had total revenues of $7,200,000 and a profit margin rate (net income divided by revenues) of 18%. The company's goals for 2011 were to achieve total revenues of at least $8,000,000 and a profit margin rate of at least 20%. Did Northland attain its goals in 2011?
d. In setting its goals for revenues and return on revenues for future periods, what types of factors do you think Northland should take into consideration?