Exercise 5-58 (Algorithmic)

Ratio Analysis

The following information was taken from Logsden Manufacturings trial balances as of December 31, 2010, and December 31, 2011.

12/31/2011	12/31/2010
Accounts receivable	$ 13,000	$ 17,000
Accounts payable	22,000	15,000
Cost of Goods Sold	140,000	119,000
Sales	274,000	239,000
Sales returns	12,000	11,000
Retained earnings	47,000	16,000
Dividends	5,000	1,000
Income from operations	27,300	16,000
Net income	21,000	18,000

1. Calculate the gross profit margin and operating margin percentage for 2011. Round your answers to two decimal places.

2. Assuming that all of the operating expenses are fixed (or, won't change as sales increase or decrease), what will be the operating margin percentage if sales increase by 25 percent? Round your answers to two decimal places.