Local Co. has sales of $10.3 million and cost of sales of $6.1 million. Its selling, general and administrative expenses are $460000 and its research and development is $1.1 million. It has annual depreciation charges of $1.1 million and a tax rate of 25% . a. What is Local's gross margin? b. What is Local's operating margin? c. What is Local's net profit margin? d. If Local Co. had an increase in selling expenses of $270000, how would that affect each of its margins?
Local Co. has sales of $10.3 million and cost of sales of $6.1 million. Its selling, general and administrative expenses are $460000 and its research and development is $1.1 million. It has annual depreciation charges of $1.1 million and a tax rate of 25% . a. What is Local's gross margin? b. What is Local's operating margin? c. What is Local's net profit margin? d. If Local Co. had an increase in selling expenses of $270000, how would that affect each of its margins?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Depreciation Methods
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Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Local Co. has sales of $10.3 million and cost of sales of $6.1 million. Its selling, general and administrative expenses are $460000 and its research and development is $1.1 million. It has annual depreciation charges of $1.1 million and a tax rate of 25% .
a. What is Local's gross margin?
b. What is Local's operating margin?
c. What is Local's net profit margin?
d. If Local Co. had an increase in selling expenses of $270000, how would that affect each of its margins?
Transcribed Image Text:Local Co. has sales of $10.3 million and cost of sales of $6.1 million. Its selling, general and administrative expenses are $460,000 and its research and
development is $1.1 million. It has annual depreciation charges of $1.1 million and a tax rate of 25%.
a. What is Local's gross margin?
b. What is Local's operating margin?
c. What is Local's net profit margin?
d. If Local Co. had an increase in selling expenses of $270,000, how would that affect each of its margins?
a. What is Local's gross margin?
Local's gross margin is %. (Round to one decimal place.)
b. What is Local's operating margin?
Local's operating margin is %. (Round to one decimal place.)
c. What is Local's net profit margin?
Locaľ's net profit margin is %. (Round to two decimal places.)
d. If Local Co. had an increase in selling expenses of $270,000, how would that affect each of its margins? (Select the best choice below.)
O A. Selling expenses do not affect the gross margin, but the increase in such expenses will decrease the other margins.
O B. Selling expenses only affect the gross margin, but the increase in such expenses will not affect the other margins.
O C. Selling expenses only affect the operating margin, but the increase in such expenses will not affect the other margins.
O D. Selling expenses only affect the net profit margin, but the increase in such expenses will not affect the other margins.
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