4.00 points E13-4 Computing Profitability Ratios [LO 13-4, 13-5] According to th

Question

4.00 points E13-4 Computing Profitability Ratios [LO 13-4, 13-5] 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. 2012 2013 63,000 38,600 Sales Ravenu Coat of Gooda Sold $10,000 S129.000 43,000 $55,100 Seling. General and Administrative Expenses Interest Expense Income bofore Incomo Tax Expenso Income Tax Expens0 38.200 16,396 4,340 S10,796 Required: 1-a. Compure the gross prot percentage for each year. (Round your answors to 1 docimal placo.) 1-b. Assuming that the change from 2012 to 2013 is the beginning of a sustained trend, is Computer Tycoon likely to eam more or less gross profit from each dollar of sales in 2014? More Gross Profit Loss Gross Prof 2-a. Compute the net profit margin for each year. (Round percentage your answers to 1 decimal place.) 2-b. Did Computer Tycoon do a better or worse job of controling expenso8 in 2013 relative to 2012? Better Job Worse Jotb

Explanation / Answer

Answer 1 a

Gross profit percentage = (Gross Profit / Sales ) * 100

Answer 1 b

Less Gross Profit

Explanation : Since the gross profit % from 2012 to 2013 is showing a decreasing trend , thus the company is likely to earn less gross profit in 2014.

Answer 2 a

Net profit percentage = (Net Profit / Sales ) * 100

Answer 2 b

Worse Job

Explanation : Since the net profit % from 2012 to 2013 is showing a decreasing trend , it indicates that the operating expense increases from 2012 to 2013

Year Woking G.P % 2012 ($55,100 / $129,000) *100 42.7 % 2013 ($43,000 / $106,000) * 100 40.6 %

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