1 answer

Ratio Analysis The following information was taken from Logsden Manufacturing's trial balances as of December 31,...

Question:

Ratio Analysis The following information was taken from Logsden Manufacturings trial balances as of December 31, 2010, and D

Ratio Analysis The following information was taken from Logsden Manufacturing's trial balances as of December 31, 2010, and December 31, 2011 Accounts receivable Accounts payable Cost of Goods Sold Sales 12/31/2011 12/31/2010 $ 13,000 $ 17,000 22,000 15,000 140,000 119,000 274,000 239,000 12,000 11,000 47.000 16,000 5,000 1,000 26,100 16,000 Sales returns Retained earnings Dividends Income from operations 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. 2011 Gross profit margin percentage Operating margin percentage 2. Assuming that all of the operating expenses are fixed Cor 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 Operating margin percentage

Answers

Net Sales 2011 = 274000-12000 = 262000

1) Gross profit margin percentage = Gross profit/Net Sales = (262000-140000)/262000 = 46.56%

2) Operating margin percentage = Income from operation/Net Sales = 26100/262000 = 9.96%

b) Operating expense = 262000-140000-26100 = 95900

Net Sales = 262000*1.25 = 327500

Gross margin = 327500*46.56% = 152484

Operating margin percentage = (152484-95900)/327500 = 17.28%

.

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