24. Mainstay Corporation recorded the following profit figures in 2011-2013. 201
ID: 2470813 • Letter: 2
Question
24. Mainstay Corporation recorded the following profit figures in 2011-2013.
2013
2012
2011
Net sales
$30,500
$25,600
$22,900
Costs and expenses:
Cost of products sold
$12,600
$10,300
$8,530
Selling
$7,875
$5,205
$4,580
General
$2,950
$2,235
$2,150
Research and development
$4,100
$3,190
$2,840
$27,525
$20,930
$18,100
Operating income
$2,975
$4,670
$4,800
Other income (expense)
$525
($300)
($400)
Earnings before tax
$3,500
$4,370
$4,400
Income tax
$1,480
$1,990
$2,100
Net income
$2,020
$2,380
$2,300
A. Compute the gross profit margin for each year
B. Using plain language, explain what the ratio tells the user and interpret the trend.
2013
2012
2011
Net sales
$30,500
$25,600
$22,900
Costs and expenses:
Cost of products sold
$12,600
$10,300
$8,530
Selling
$7,875
$5,205
$4,580
General
$2,950
$2,235
$2,150
Research and development
$4,100
$3,190
$2,840
$27,525
$20,930
$18,100
Operating income
$2,975
$4,670
$4,800
Other income (expense)
$525
($300)
($400)
Earnings before tax
$3,500
$4,370
$4,400
Income tax
$1,480
$1,990
$2,100
Net income
$2,020
$2,380
$2,300
A. Compute the gross profit margin for each year
B. Using plain language, explain what the ratio tells the user and interpret the trend.
Explanation / Answer
A.
Gross Profit Margin is computed as under:
B.
This ratio indicates that the margin on sales is decreasing each year.
2013 2012 2011 Net sales 30,500 25600 22900 Costs and expenses: Cost of products sold 12600 10300 8530 Gross profit 17900 15300 14370 Gross Profit Margin 58.69% 59.77% 62.75%Related Questions
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