Co. has sales of $10.9 milion and cost of sales of $5.8 million. Its selling. ge

Question

Co. has sales of $10.9 milion and cost of sales of $5.8 million. Its selling. general and administrative expensos are $520,000 and its research and development is $1.3 million. It has annual depreciation charges of $1.2 milion and a tax rate of 35% a. What is Local's gross margin? c. What is Local's net profit margin? d. If Local Co. had an increase in selling expenses of $260,000, how would that affect each of its margins? a. What is Local's gross margin? Loca's gross margin is %. (Round to one decimal place.) b. What is Local's operating margin? Local's operating margin is %. (Round to one decimal place) c. What is Local's net profit margin? Local's net profit margin is % (Round to two decimal places.) d. r Local Co had an increase in seling esxpenses of $260,000, ow would that affet each of is margins? (Select he best choice below) operating margin, but the increase in such expenses will not affect the other margins. expenses only affect the gross margin, but the increase in such expenses will not affect the other margins C. Selling expenses do not affect the 0 D. Sein expenses only affect gross margin, but the increase in such expenses will decrease the other margins. margins. the net profit margin, but the increase in such expenses will not affect the other Click to select your answerfs). MacBook

Explanation / Answer

gross margin=(10.9-5.8)/10.9=46.8%

operating margin=(10.9*1000000-5.8*1000000-520000-1.3*1000000-1.2*1000000)/(10.9*1000000)=19.1%

net margin=((10.9*1000000-5.8*1000000-520000-1.3*1000000-1.2*1000000)*(1-35%))/(10.9*1000000)=12.4%

part d

the c option is the answer

as selling costs does not impact gross margins

the above are the answers

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