<u>Solution</u>
Yoste Company Noone Company
Sales revenue($100,000 + $5,000) $90,000 $105,000
Sales returns and allowances ($6,000) ($5,000)
Net sales $84,000 $100,000
Cost of goods sold($100,000 - $40,000) ($58,000) ($60,000)
Gross profit($84,000 - $58,000) $26,000 $40,000
Operating expenses($40,000 - $17,000) ($14,380) ($23,000)
Net income($26,000 - $14,380) $11,620 $17,000
- Net Income divide by Net Sales = Profit Margin Ratio
- Gross Profit divide by Net Sales = Gross Profit Rate
<u>Yoste Company :
</u>
Profit Margin Ratio = $11,620 divide by $84,000 = 13.83%
Gross Profit Rate = $26,000 divide by $84,000 = 30.95%
<u>Noone Company:</u>
Profit Margin Ratio = $17,000 divide by $100,000 = 17%
Gross Profit Rate = $40,000 divide by $100,000 = 40%
