Required information E3-18 (Static) Analyzing the Effects of Transactions Using T-Accounts and Interpreting the Net Profit Margin Ratio as a Financial Analyst LO3-4, 3-6 [The following information applies to the questions displayed below.] Massa Company, which has been operating for three years, provides marketing consulting services worldwide for dot-com companies. You are a financial analyst assigned to report on the Massa management team's effectiveness at managing its assets efficiently. At the start of 2019 (its fourth year), Massa's T-account balances were as follows. Dollars are in thousands. Assets Accounts Receivable Cash 3,200 8,000 Long-Term Investments 6,400 Liabilities Accounts Payable Unearned Revenue Long-Term Notes Payable 2,400 5,600
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Please make sure that the net profit margin ratio is correct.
![### Required Information
**E3-18 (Static) Analyzing the Effects of Transactions Using T-Accounts and Interpreting the Net Profit Margin Ratio as a Financial Analyst LO3-4, 3-6**
[The following information applies to the questions displayed below.]
Massa Company, which has been operating for three years, provides marketing consulting services worldwide for dot-com companies. You are a financial analyst assigned to report on the Massa management team’s effectiveness at managing its assets efficiently. At the start of 2019 (its fourth year), Massa's T-account balances were as follows. Dollars are in thousands.
**Assets:**
- **Cash:** $3,200
- **Accounts Receivable:** $8,000
- **Long-Term Investments:** $6,400
**Liabilities:**
- **Accounts Payable:** $2,400
- **Unearned Revenue:** $5,600
- **Long-Term Notes Payable:** $1,600
**Stockholders’ Equity:**
- **Common Stock ($0.10 par value):** $800
- **Additional Paid-in Capital:** $4,000
- **Retained Earnings:** $3,200
**Revenues:**
- **Consulting Fee Revenue**
- **Interest Revenue**
**Expenses:**
- **Wages Expense**
- **Travel Expense**
- **Utilities Expense**
- **Rent Expense**
**Transactions for 2019:**
a. Provided $58,000 in services to clients who paid $48,000 in cash and owed the rest on account.
b. Received $5,600 cash from clients on account.
c. Received $400 in cash as interest revenue on investments.
d. Paid $36,000 in wages, $2,000 in travel, $7,600 in rent, and $1,600 on accounts payable.
e. Received $6,100 in cash from clients in advance of services Massa will provide next year.
f. Received a utility bill for $800 for 2019 services.
g. Declared and immediately paid $480 in dividends to stockholders.
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### E3-18 Part 4
4. **Calculate the net profit margin ratio for 2019. (Round your answer to 2 decimal places.)**
#### Calculation:
- **Net profit margin ratio:** 3.40%
**Note:** The answer provided is complete but is indicated as “not entirely correct](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F266d5c88-4132-4eca-8561-6ebd3b0393f5%2Fd8a58e15-5029-4a6c-94bc-f9b914a8cc07%2Fbv18f2s_processed.png&w=3840&q=75)
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