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Analyze the income statement of ABC Tech for the fiscal year ending December 31, 2023, focusing on its cost structure and profitability. ABC Tech Income

Analyze the income statement of ABC Tech for the fiscal year ending December 31, 2023, focusing on its cost structure and profitability.

ABC Tech Income StatementYear Ended December 31, 2023
Revenue
Software Sales$600,000
Hardware Sales$300,000
Service Revenue$100,000
Total Revenue$1,000,000
Expenses
Cost of Goods Sold - Software$200,000
Cost of Goods Sold - Hardware$150,000
Operating Expenses$250,000
Research and Development$100,000
Depreciation Expense$30,000
Interest Expense$20,000
Income Tax Expense$50,000
Total Expenses$800,000
Net Income$200,000

Questions:

  1. Compute the contribution margin for both software and hardware sales and discuss its importance in cost structure analysis.
  2. Calculate the net profit margin and discuss how research and development expenses impact overall profitability.

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