Compute the profit margin for 2013. (Input the profit margin as a percent rounde

Question

Compute the profit margin for 2013. (Input the profit margin as a percent rounded to 2 decimal places.)

Assume in 2014, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Once again, assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 2014? (Input the profit margin as a percent rounded to 2 decimal places.)

Explanation / Answer

Profit Margin = Net Income After Tax / Sales = 605780 / 2750000 = 22.03%

Revised Sales = 2750000 * 1.10 = 3025000

Revised COGS = 1450000 * 1.20 = 1740000

Gross Profit = 3025000 - 1740000 = $ 1285000

Selling And Admin Expense + Interest Expense = 377000 + 57600 = 434600

Income Before Taxes = Gross Profit - (Selling And Admin Expense + Interest Expense )

Income Before Taxes = 1285000 - 434600 = 850400

Incoem After tax = 850400 - 850400 * 0.3 = 850400 - 255120 = 595280

Profit Margin = 595280 / 3025000 = 19.68%

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