2017 2016 2015 Net sales $30,500 $25,600 $22,900 Costs and expenses: Cost of pro
ID: 2784253 • Letter: 2
Question
2017
2016
2015
Net sales
$30,500
$25,600
$22,900
Costs and expenses:
Cost of products sold
$12,600
$10,300
$ 8,350
Selling
7,875
5,025
4,580
General
2,950
2,325
2,150
Research and development
4,100
3,190
2,840
$27,525
$20,840
$17,920
Operating income
$ 2,975
$ 4,760
$ 4,980
Other income (expense)
525
(300)
(400)
Earnings before tax
$ 3,500
$ 4,460
$ 4,580
Income tax
1,480
1,990
2,100
Net income
$ 2,020
$ 2,470
$ 2,480
Required:
a.
Compute the net margin on sales (Net income / Net sales) for 2015-2017.
b.
Compute the gross margin on sales for 2015-2017.
c.
Describe the trend in profitability (rising, falling) and pinpoint its causes
2017
2016
2015
Net sales
$30,500
$25,600
$22,900
Costs and expenses:
Cost of products sold
$12,600
$10,300
$ 8,350
Selling
7,875
5,025
4,580
General
2,950
2,325
2,150
Research and development
4,100
3,190
2,840
$27,525
$20,840
$17,920
Operating income
$ 2,975
$ 4,760
$ 4,980
Other income (expense)
525
(300)
(400)
Earnings before tax
$ 3,500
$ 4,460
$ 4,580
Income tax
1,480
1,990
2,100
Net income
$ 2,020
$ 2,470
$ 2,480
Explanation / Answer
Net Margin = Net Income / Sales
Gross Margin = (Sales - COGS) /Sales = Gross Profit / Sales
The trend is clearly declining for both net margin and gross margin. The causes are increase in expenses, both COGS and selling, which impact the margins.
2017 2016 2015 Net sales $30,500 $25,600 $22,900 COGS $12,600 $10,300 $8,350 Gross Profit $17,900 $15,300 $14,550 Net income $2,020 $2,470 $2,480 Net Margin 6.6% 9.6% 10.8% Gross Margin 58.7% 59.8% 63.5%Related Questions
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