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Darina [25.2K]
3 years ago
12

Local Co. has sales of $ 10.8 million and cost of sales of $ 5.7 million. Its​ selling, general and administrative expenses are

$ 550,000 and its research and development is $ 1.2 million. It has annual depreciation charges of $ 1.2 million and a tax rate of 35 %.
a. What is Local's gross margin? (answer in %, Round to one decimal place.)b. What is Local's operating margin? (answer in %, Round to one decimal place.)c. What is Local's net profit margin? (answer in %, Round to two decimal places.)
Business
1 answer:
DaniilM [7]3 years ago
3 0

Answer:

Gross profit Margin = 47.2%

Operating profit margin = 19.9%

Net Profit Margin = 12.93%

Explanation:

Requirement A:  Gross profit margin

Gross Profit = Sales - Cost of sales

Gross Profit = 5.1m

Gross profit Margin = Gross profit/Sales x 100

Gross profit Margin = 5.1/10.8 x 100

Gross profit Margin = 47.2%

Requirement B: Operating profit margin

Operating profit margin = Operating Profit/ Sales x 100

Operating Profit = Gross Profit - selling,general and administrative expense -research and development - depriciation

Operating Profit = 5.1m - 0.55m - 1.2m - 1.2m

Operating Profit = 2.15m

Operating profit margin = 2.15m/10.8m x 100

Operating profit margin = 19.9%

Requirement C: Net profit Margin

Net Profit margin = Net profit / Sales x100

Net Profit = Operating profit - tax

Net Profit = 2.15m - (2.15m x 35%)

Net Profit = 2.15m - 0.7525m

Net Profit = 1.3975m

Net Profit Margin = 1.3975m/10.8m x 100

Net Profit Margin = 12.93%

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Under variable costing, constant manufacturing overhead fee is handled as product cost. If the range of devices produced exceeds the range of gadgets sold, then net operating income under absorption costing will: be extra than net operating earnings underneath variable costing.

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6 0
2 years ago
Blumen Textiles Corporation began April with a budget for 22,000 hours of production in the Weaving Department. The department h
tankabanditka [31]

Answer:

A. 1300 Favorable

B. $7,200 UnFavorable

Explanation:

A. Calculation to determine the variable factory overhead controllable variance

First step is to calculate the Budgeted rate of variable overhead

Budgeted rate of variable overhead = $50,600/22,000

Budgeted rate of variable overhead= $2.3per hour

Second step is to calculate the Standard variable overhead for actual production

Standard variable overhead for actual production = 23,000 x $2.3

Standard variable overhead for actual production = $52,900

Now let calculate the Variable factory overhead controllable variance using this formula

Variable factory overhead controllable variance = Standard variable overhead - Actual variable overhead

Let plug in the formula

Variable factory overhead controllable variance= $52,900 - ($86,400 - 34,800)

Variable factory overhead controllable variance= 1300 Favorable

Therefore Variable factory overhead controllable variance is 1300 Favorable

B. Calculation to determine the fixed factory overhead volume variance.

First step is to calculate the Predetermined fixed overhead rate using this formula

Predetermined fixed overhead rate = 34,800/29,000

Predetermined fixed overhead rate = $1.20 per hour

Second step is to calculate the Fixed overhead applied

Using this formula

Fixed overhead applied = Standard hours x Standard rate

Let plug in the formula

Fixed overhead applied= 23,000 x $1.20

Fixed overhead applied= $27,600

Now let calculate the Fixed overhead volume variance using this formula

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead

Let plug in the formula

Fixed overhead volume variance= $27,600 - 34,800

Fixed overhead volume variance= $7,200 UnFavorable

Therefore The Fixed overhead volume variance is $7,200 UnFavorable

5 0
3 years ago
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Is any answers option 
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3 years ago
In its first year of operations, Gomes Company recognized $28,000 in service revenue, $6,000 of which was on account and still o
Mademuasel [1]

Answer:

a. The first year's net earnings under the cash basis of accounting is $7,600 and the first year's net earnings under the basis of accounting is $12,200

b. Accrual basis of accounting provides more useful information.

Explanation:

a. In order to calculate the first year's net earnings under the cash basis of accounting we would have to use the following formula:

Cash basis net earnings = Service revenue (Cash) – Cash expenses – Prepaid expenses

Cash basis net earnings =$22,000 – $12,000 – $2,400

Cash basis net earnings =$7,600

In order to calculate the first year's net earnings under the the basis of accounting we would have to use the following formula:

Accrual basis net earnings = Service revenue – Operating expenses incurred

Accrual basis net earnings= $28,000 – $15,800

Accrual basis net earnings=$12,200

b. Accrual basis of accounting provides more useful information, because in this system revenues are recorded what actually earned and expenses are recorded what actually incurred for earning such revenues. Therefore, it gives better profit picture

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