5. Profitability ratios (LO2) Dr. Zhivago Diagnostics Corp. income statements for 20X1 are as follows: Sales ..... Cost of goods sold......... Gross profit....... Selling and administrative expense. Operating profit. Interest expense... Income before taxes Taxes (30%). Income after taxes. $2,790,000 1,790,000 1,000,000 302,000 698,000 54,800 643,200 192,960 $ 450,240 a. Compute the profit margin for 20X1. b. Assume that in 20X2, 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. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2