Diagnostics Corp. income statements for 2013 is as follows:

Sales....................................................................................... $2,000,000

Cost of goods sold................................................................. 1,400,000

Gross profit............................................................................ 600,000

Selling and administrative expense........................................ 300,000

Operating profit..................................................................... 300,000

Interest expense..................................................................... 50,000

Income before taxes............................................................... 250,000

Taxes (30%)........................................................................... 75,000

Income after taxes................................................................. $ 175,000

a. Compute the profit margin for 2013.

b. 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 are income after taxes and the profit margin for 2014?