According to the producer price index database maintained by the Bureau of Labor

Question

According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 4.8 percent between 2012 and 2013. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2013 2013 $118,000 $147,000 2012 Sales Revenue Cost of Goods Sold 69,000 78,700 Gross Profit Interest Expense Income before Income Tax Expense 49,000 68,300 Selling, General, and Administrative Expenses 37,800 40,600 565 680 10,520 27,135 6,800 Income Tax Expense 2,500 Net Income $ 8,020 $ 20,335 Required: 1-a. Compute the gross profit percentage for each year. (Round your answers to 1 decimal place.) ross Profi Percentage 2012 2013 1-b. Assuming that the change from 2012 to 2013 is the beginning of a sustained trend, is Computer Tycoon likely to earn more or less gross profit from each dollar of sales in 2014? O More Gross Profit O Less Gross Profit 2-a. Compute the net profit margin for each year. (Round your answers to 1 decimal place.) Margin 2012 2013

Explanation / Answer

1.a Gross Profit ratio=Gross profit /sales 2013 2012 =49000/118000    =68300/147000 0.4153 0.4646 1.b less gross profit 2.a Net profit ratio    =net profit/sales 2013 2012     =8020/118000     =20335/147000 0.0680 0.1383 2.b Controlling expense are less in 2013, so better job in 2013 3.a Fixed assets turnover ratio    =Net sales/Average Fixed assets 2013 2012    =118000/56000    =147000/46900 2.1071 3.1343 3.b the fixed asset turover ratio is better in 2012 than 2013, so company utilize investment better in 2012 4.a Return on equity    =Net income/Shareholder equity 2013 2012     =8020/55800     =20335/42600 0.1437 0.4773 4.b No

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