SIOWA Express, Inc. Income Statement $ 10,425,523 Petroleum sales Merchandise sa

Question

SIOWA Express, Inc. Income Statement $ 10,425,523 Petroleum sales Merchandise sales Interest income Petroleum cost of goods sold Merchandise cost of goods sold Station operating expenses Selling and administrative expenses Depreciation and amortization Income tax expense Interest expense Loss on sale of equipment 2,273,888 2,177 (9,794,475) (1,946,423) (486,383) (130,798) (86,568) (80,698) (33,531) (5,121) $137,591 Net income Answer each of the following questions related to the SIOWA Express financial statements. SIOWA operates three convenience stores in Louisa County. A. Calculate the 2017 gross profit percentage on merchandise sales. I. Ceclat he 2017 gooi rceatans wa Net sales revenve B. Calculate the 2017 gross profit percentage on petroleum sales. C. Would you recommend that SIOWA's management focus on expanding merchandise sales or petroleum sales? Explain why D. Calculate the net profit margin for 2017.

Explanation / Answer

1a) Gross Profit Percentage on Merchandise Sales:-

= (Sales of Merchandise - Cost of Goods Solds of Merchandise) / Sales of Merchandise

= ($2273888 - $1946423) / $2273888

= $327465 / $2273888

= 0.1440 or 14.40%

1b) Gross Profit Percentage on Petroleum Sales:-

= (Sales of Petroleum - Cost of Goods Solds of Petroleum) / Sales of Petroleum

= ($10425523 - $9794475) / $10425523

= $631048 / $10425523

= 0.0605 or 6.05%

1c) I Recommend to SIOWA's managemet focus on Expanding Merchandise Sales,

Because, Merchandise's Gross Profit Rate is Greater than Petroleum's Gross Profit Rate.

1d) Net Profit Margin ;-

= Net Income / (Petroleum Sales + Merchandise Sales)

= $137591 / ($10425523 + $2273888)

= $137591 / $12699411

= 0.0108 or 1.08%

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