01. ABC Stones has a net sales of $180,000 in 2014. The cost of goods sold was $

Question

01. ABC Stones has a net sales of $180,000 in 2014. The cost of goods sold was $85,000, operating expenses (excluding depreciation) were 35,000, interest expertise were $5,000 and despeciation expense was $20,000. The firm?s tax rate is 35 percent. What is the company?s earnings before interest and taxes (EBIT) for 2014? What is the net income? Suggest a change in the activities of the firm that would lead to an increase in gross margin of 20%, e.g do X that would change item Y is the income statement, which would then increase gross margin by 20%.

Explanation / Answer

Statement showing computations Particulars Amount Increase Sales by 20% Net Sales        180,000.00                            216,000.00 Cost of goods sold          85,000.00                            102,000.00 Gross Margin          95,000.00                            114,000.00 Operating Expenses          35,000.00                              35,000.00 Depreciation          20,000.00                              20,000.00 a)   Earnings before intt and tax          40,000.00                              59,000.00 Interest Expense             5,000.00                                5,000.00 Earnings before Tax          35,000.00                              54,000.00 Tax @35%          12,250.00                              18,900.00 b)      Earnings after tax or Net Income          22,750.00                              35,100.00

Related Questions

Navigate

• Browse (All)
• Browse
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.