Question

Kingbird, Inc. reported net sales of $267,000, cost of goods sold of $160,200, operating expenses of $48,900, net income of $42,720, beginning total assets of $532,300, and ending total assets of $618,100. Calculate profit margin and gross profit rate. (Round answers to 1 decimal place, e.g. 10.2%.)

Answer 1

Answer and Explanation:

The computation is shown below:

Profit margin = Net income ÷ Net sales

= $42,720 ÷ $267,000

= 16%

Now the gross profit rate is

But before that the gross profit is

Gross profit = Net sales - Cost of goods sold

= $267,000 - $160,200

= $106,800

Now Gross profit rate is

= Gross profit ÷ Net sales

= $106,800 ÷ $267,000

= 40%