r. Gupta Diagnostics' income statement for 20XX is as follows: Sales Cost of goods sold Gross profit Selling and administrative expense Operating profit Interest expense Income before taxes Taxes (30%) Income after taxes 20XY $2,440,000 1,460,000 Income after taxes $ Profit margin % 980,000 373,000 607,000 53,500 553,500 166,050 a. Compute the profit margin in 20XX. (Round the final answer to 2 decimal places.) Profit margin % b. Assume in 20XY sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Once again, assume a tax rate of 30 percent. What are the income after taxes and profit margin in 20XY? (Round the profit margin to 2 decimal places.) $387,450
r. Gupta Diagnostics' income statement for 20XX is as follows: Sales Cost of goods sold Gross profit Selling and administrative expense Operating profit Interest expense Income before taxes Taxes (30%) Income after taxes 20XY $2,440,000 1,460,000 Income after taxes $ Profit margin % 980,000 373,000 607,000 53,500 553,500 166,050 a. Compute the profit margin in 20XX. (Round the final answer to 2 decimal places.) Profit margin % b. Assume in 20XY sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Once again, assume a tax rate of 30 percent. What are the income after taxes and profit margin in 20XY? (Round the profit margin to 2 decimal places.) $387,450
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:r. Gupta Diagnostics' income statement for 20XX is as follows:
Sales
Cost of goods sold
Gross profit
Selling and administrative expense
Operating profit
Interest expense
Income before taxes
Taxes (30%)
Income after taxes
20XY
$2,440,000
1,460,000
Income after taxes $
Profit margin
%
980,000
373,000
607,000
53,500
553,500
166,050
a. Compute the profit margin in 20XX. (Round the final answer to 2 decimal places.)
Profit margin
%
b. Assume in 20XY sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all
other expenses the same. Once again, assume a tax rate of 30 percent. What are the income after taxes and profit margin
in 20XY? (Round the profit margin to 2 decimal places.)
$387,450
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