Question

Flingers Inc. reveals the following information in their annual report for FY 2017. Earnings and Expenses Sales ​$10,000,000 Cost of goods sold ​ $5,000,000 Pretax earnings ​ $500,000 Selected Balance Sheet Items Merchandise inventory ​ $80,000 Total assets ​ $2,000,000 Upper management plans to cut cost of goods sold by​ 5% for the coming year but retain the same sales. What will​ Flingers' profit margin be for​ 2018?

Answer 1

Answer:

What will​ Flingers' profit margin be for​ 2018?

Profit Margin  $750,000  

Explanation:

• These are the results of 2017 without changes in the cost of goods.

Income Statement 2017

Sales                                   10,000,000  

Cost of Goods Sold         -5,000,000  

Net Income                         5,000,000  

Non Operating Expenses -4,500,000  

Net Income After Taxes  $500,000     5%

• When the improvements are made , the company has an efficiency in the cost of goods, it will report a better profit margin.

Income Statement         2018

Sales                                   10,000,000  

Cost of Goods Sold        -4,750,000  

Net Income                           5,250,000  

Non Operating Expenses -4,500,000  

Net Income After Taxes     750,000     7,5%