Question

Local Co. has sales of

$10.9

million and cost of sales of

$6.4

million. Its​ selling, general and administrative expenses are  

$450,000

and its research and development is

$1.5

million. It has annual depreciation charges of

$1.3

million and a tax rate of

35%.

a. What is​ Local's gross​ margin?

b. What is​ Local's operating​ margin?

c. What is​ Local's net profit​ margin?

Answer 1

Calculate net profit of company
Sales revenue	1,09,00,000
Cost of sales	(64,00,000)
Gross margin	45,00,000
Less: Operating expenses
Selling, general and administrative expenses	4,50,000
Research and development	15,00,000
Depreciation expense	13,00,000
Total operating expenses	(32,50,000)
Operating income	12,50,000
Less: Taxes @ 35%	(4,37,500)
Net income	8,12,500
a.
Gross margin	Gross margin/Sales revenue
Gross margin	4500000/10900000
Gross margin	41.28%
b.
Operating margin	Operating income/Sales revenue
Operating margin	1250000/10900000
Operating margin	11.47%
c.
Net profit margin	Net income/Sales revenue
Net profit margin	812500/10900000
Net profit margin	7.45%