Question

Suspendus Company has the following financial data for the year ended December 31, 2021: net sales 1,680,000, operating expenses 880,000, net income 104,000, stockholders' equity 800,000, and assets 1,901,000. The information for the year ended December 31, 2020 was: net sales 1,450,000, operating expenses 760,000, net income 87,000, stockholders' equity 700,000, and assets 1,601,000. Calculate the gross profit margin for the year ended December 31, 2021.

1) 6.2
2) 47.6
3) 52.4
4) There is not enough information to answer the question.

Answer 1

The gross profit margin for Suspendus Company cannot be calculated from the given data, as the cost of goods sold is not provided. The answer is that there is not enough information to answer the question. For the self-check question, the firm's accounting profit is $50,000.

Step-by-step explanation:

The gross profit margin is calculated by subtracting the cost of goods sold (COGS) from net sales and then dividing that number by net sales. However, in the provided information from Suspendus Company, the COGS is not directly provided. Instead, we are given net sales and operating expenses. Usually, gross profit is calculated prior to subtracting operating expenses, so without knowing the cost of goods sold or gross profit, we cannot calculate the gross profit margin accurately. Therefore, the answer is option 4) There is not enough information to answer the question.

For the self-check question, the firm's accounting profit can be calculated by subtracting the explicit costs of labor, capital, and materials from the sales revenue. So, accounting profit = $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.