In: Finance
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 ______%
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 :-