Question

Mercedes, Co. has the following quarterly financial information. 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Sales revenue $ 913,800 $ 923,300 $ 921,600 $ 929,400 Cost of goods sold 305,100 317,700 317,300 322,500 Operating expenses 248,300 259,700 257,900 262,000 Interest expense 3,900 3,900 3,900 3,800 Income tax expense 84,900 87,800 87,800 90,300 Average number of common shares outstanding 796,030 791,064 792,670 806,000 Stock price when Q4 EPS released $ 24 a. Calculate the gross profit percentage for each quarter. (Do not round your intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

Mercedes, Co.

Gross profit percentage for each quarter:

= Gross profit / Sales x 100

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

Gross profit $ 608,700 $ 605,600 $ 604,300 $ 606,900

Sales revenue $ 913,800 $ 923,300 $ 921,600 $ 929,400

Gross profit $ 66.61% 65.59% 65.57% 65.30%

Step-by-step explanation:

a) Data and Calculations:

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

Sales revenue $ 913,800 $ 923,300 $ 921,600 $ 929,400

Cost of goods sold 305,100 317,700 317,300 322,500

Gross profit $ 608,700 $ 605,600 $ 604,300 $ 606,900

Operating expenses 248,300 259,700 257,900 262,000 Interest expense 3,900 3,900 3,900 3,800

Income tax expense 84,900 87,800 87,800 90,300

Average number of common

shares outstanding 796,030 791,064 792,670 806,000

b) The Gross profit percentage of Mercedes, Co for each quarter is calculated as the gross profit divided by sales revenue, and then multiplied by 100. To obtain the gross profit, the cost of goods sold is deducted from the sales revenue. The gross profit represents a financial measure that shows the performance of management in controlling the cost of goods sold in comparison with the sales revenue. It is from the gross profit that operating expenses, interests, and taxes will be offset to arrive at the net income.