Dr. Zhivàgo Diagnostics Corp.'s income statement for 20X1 is as follows: Sales $ 2,970,000 Cost...

Dr. Zhivàgo Diagnostics Corp.'s income statement for 20X1 is as follows:


Sales	$	2,970,000
Cost of goods sold		1,600,000
Gross profit	$	1,370,000
Selling and administrative expense		375,000
Operating profit	$	995,000
Interest expense		57,000
Income before taxes	$	938,000
Taxes (30%)		281,400
Income after taxes	$	656,600

a. Compute the profit margin for 20X1. (Input the profit margin as a percent rounded to 2 decimal places.)

Profit margin _____%

b. Assume that in 20X2, 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. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2? (Input the profit margin as a percent rounded to 2 decimal places.)

20X2

income after taxes____

profit margin ______%

Solutions

Expert Solution

Given,

Dr. Zhivàgo Diagnostics Corp.'s income statement for 20X1 :-

Sales	$	2,970,000
Cost of goods sold		1,600,000
Gross profit	$	1,370,000
Selling and administrative expense		375,000
Operating profit	$	995,000
Interest expense		57,000
Income before taxes	$	938,000
Taxes (30%)		281,400
Income after taxes	$	656,600

Solution :-

jeff jeffy answered 1 year ago

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