Question

Low Carb Diet Supplement Inc. has two divisions. Division A has a profit of $150,000 on sales of $2,780,000. Division B is able to make only $28,400 on sales of $307,000. a. Compute the profit margins (return on sales) for each division. (Input your answers as a percent rounded to 2 decimal places.) b. Based on the profit margins (returns on sales), which division is superior

Answer 1

Answer:

(a) Profit margin for A = 5.40%, For division B =9.25% (b) Division B has a superior higher profit margin

Explanation:

Solution

Given that

Division A has a profit = 150,000

sales = $2,780,000

Division B  profit = $28,400

Sales =$307,000

Now

(a)We compute for the margin profit for each division which is giving below:

Profit margin=Profit/Sales

Profit margin for A=(150000/2,780,000)

=5.40%

Profit margin for B = (28400/307000)

=9.25%

(b The division B is superior having higher profit margin.