Q: Based on the income statement for Peachtree Construction shown below, what is the ratio of operating profit to completed contract sales. Is this ratio acceptable? Explain.

Income Statement, Peachtree Construction (Year ended 31 December 20X5) 2,143,761 1,013,913 548,271 201,798 51,450 1,815,432 328,329 % of Sales 100 47.3 25.57 9.41 24 84.68 15.32 12,089 5,575 1,275 213 1,943 871 21,966 0.57 0.26 0.05 0.01 0.09 0.04 1.02 Net sales-total revenue costs Materials Labor (includes all payroll taxes and union fringes) Subcontracts Other direct costs Total direct costs Gross profit Operating expenses Variable overhead Auto and truck Communications Interest Miscellaneous Office supplies Travel and entertainment Total variable overhead Fixed overhead Contributions Depreciation Dues and subscriptions Insurance Legal and audit Licenses and taxes Payroll taxes (office only) Rent Repairs and maintenance Salaries-office Salaries-officers Total fixed overhead Total overhead Net profit before taxes State and federal taxes Net profit 0.03 0.38 0.02 0.58 675 8,238 514 12,475 2,315 175 51,790 2,506 375 23,418 38,410 140,891 162.857 165,472 77,076 88,396 0.1 0.01 2.42 0.12 0.02 1.1 1.79 6.57 7.59 7.73 3.6 4.13