Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dr. Zhivago Diagnostics Corp.'s income statement for 20X1 is as follows: Sales $2,790,000 Cost of Good Sold 1,650,000 Gross Profit $1,140,000 Selling and administrative expense

Dr. Zhivago Diagnostics Corp.'s income statement for 20X1 is as follows:

Sales $2,790,000
Cost of Good Sold 1,650,000
Gross Profit

$1,140,000

Selling and administrative expense

356,000

Operating profit $784,000
Interest Expense 58,200
Income before taxes $725,800
Taxes (30%) 217,740
Income after taxes $508,060

A. Compute the profit margin for 20X1. (Input the profit margin as a percent rounded to 2 decimal places.)

B. Assume 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. Once again, assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2? (Input the profit margin as a percent rounded to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Risk Manager Handbook

Authors: Philippe Jorion, Global Association Of Risk Professionals

5th Edition

0470479612, 978-0470479612

More Books

Students also viewed these Finance questions