One size fits all casket co income statement for 2008 is as follows Sales…………………

Question

One size fits all casket co income statement for 2008 is as follows

Sales……………………………………………………$3,000,000
Cost of goods sold……………………………………… 2,100,000
Gross profit…………………………………………… …900,000
Selling and administrative expense…………………… …450,000
Operating profit……………………………………… …..450,000
Interest expense………………………………………… .75,000
Income before taxes………………………………… … …375,000.
Taxes (30%)………………………………………………...112,500
Income after taxes………………………………………….$262,500

a. Compute the profit margin for 2008.

b. Assume that in 2009 sales increase by 10 percent and cost of goods sold increases by 25 percent. The firm is able to keep all other expenses the same. Once again, assume a tax rate of 30 percent on income before taxes, what are income after taxes and the profit margin for 2009?

Explanation / Answer

a.Profit margin for 2008 Profit margin for 2008= Net income/Net Sales $262,500/3,000,000 0.0875 b.Income Statement for 2009 Sales $3,300,000 Less: Cost of Goods Sold 2,625,000 Gross Profit 675,000 Selling and administrative expenses                   (450,000) Operating Profit 225,000 Interest Expenses -75,000 Income before taxes 150,000 Taxes 30% 45,000 Income after taxes 105,000 Profit margin for 2009 Profit margi for 2009 = Net Income/Net Sales $105,000/3,300,000 0.0318 0.032

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