Question

Financial information for two companies are presented below.

Fill in the missing amounts.

		Sandhill Company		Carla Vista Company
Sales revenue		$ 90,800		$
Sales returns and allowances				$  5,000
Net sales		83,000		127,000
Cost of goods sold		55,200
Gross profit		$		41,000
Operating expenses		14,580
Net income		$		18,000

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Calculate the profit margin and the gross profit rate for each company. (Round answers to 1 decimal place, e.g. 15.5%.)

		Sandhill Company			Carla Vista Company
Profit margin			%			%
Gross profit rate			%			%

Answer 1

answer
1		Sandhill Company	Carla Vista Company
	sales revenue	$ 90800	$ 132000 (workings 1)
	sales returns and allowances	$ 7800 (workings 2)	$ 5000
	net sales	$ 83000	$ 127000
	cost of goods sold	$ 55200	$ 86000 (workings 3)
	gross profit	$ 27800 (workings 4)	$ 41000
	operating expenses	$ 14580	$ 23000 (workings 5)
	net income	$ 13220 (workings 6)	$ 18000
2		Sandhill Company	Carla Vista Company
	Profit margin ( net income / net sales )	=13220/83000	=18000 / 127000
		15.93%	14.17%
	gross profit rate ( gross profit / net sales )	=27800/83000	=41000/127000
		33.49%	32.28%
workings 1
	computation of sale revenue of 'CV' company
	net sales = sales revenue - sales return allowances
	sale revenue = net sales + sales return and allowances
	= 127000 - 5000		$ 132000
workings 2
	computation of sales returns and allowances of 'S' company
	net sales = sales revenue - sales return allowances
	sales returns and allowances = sales revenue - net sales
	= 90800 - 83000		$ 7800
workings 3
	computation of costs of goods sold of 'CV' company
	gross profit = net sales - cost of goods sold
	cost of goods sold = net sales - gross profit
	= 127000 - 41000		$ 86000
workings 4
	computation of gross profit of 'S' company
	gross profit = net sales - cost of goods sold
	= 83000 - 55200		$ 27800
workings 5
	computation of operating exepnses of 'CV' company
	net income = gross profit - operating expenses
	operating expenses = gross profit - net income
	= 41000 - 18000		$ 23000
workings 6
	computation of net income of 'S' company
	net income = gross profit - operating expenses
	= 27800 -14580		$ 13220