Local Co. has sales of $ 10.5 million and cost of sales of $ 6.4 million. Its selling, general and administrative expenses are $ 490,000$ and its research and development is $ 1.1 million. It has annual depreciation charges of $ 1.2 million and a tax rate of 35 %

a. What is Local's gross margin?

b. What is Local's operating margin?

c. What is Local's net profit margin?

d. If Local Co. had an increase in selling expenses of

$320,000,

how would that affect each of its margins?

e. If Local Co.had interest expense of

$830,000,

how would that affect each of its margins?

a. What is Local's gross margin?

Local's gross margin is %.

(Round to one decimal place.)

b. What is Local's operating margin?

Local's operating margin is %.

(Round to one decimal place.)

c. What is Local's net profit margin?

Local's net profit margin is %.

(Round to two decimal places.)

d. If Local Co. had an increase in selling expenses of $320,000,

how would that affect each of its margins?(Select the best choice below.)

A.

Selling expenses do not affect the gross margin, but the increase in such expenses will decrease the other margins.

B.

Selling expenses only affect the operating margin, but the increase in such expenses will not affect the other margins.

C.

Selling expenses only affect the gross margin, but the increase in such expenses will not affect the other margins.

D.

Selling expenses only affect the net profit margin, but the increase in such expenses will not affect the other margins.

e. If Local Co.had interest expense of $830,000,

how would that affect each of its margins? (Select the best choice below.)

A.

Only the operating margin accounts for interest expense, so both the gross and profit margins will be unaffected.

B.

Only the gross margin accounts for interest expense, so both the net profit and operating margins will be unaffected.

C.

Both the gross and operating margins will be affected, but the net profit margin will be unaffected.

D.

Only the net profit margin accounts for interest expense, so both the gross and operating margins will be unaffected.