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yarga [219]
2 years ago
11

The average price of a gallon of gas in 2015 dropped $0.94 (28 percent) from $3.34 in 2014 (to $2.40 in 2015). Let’s see whether

these changes are reflected in the income statement of Insignia Corporation for the year ended December 31, 2015 (amounts in billions).
2015 2014
Revenues $225 $242
Cost of Purchased Crude Oil and Products 119 127
Other Operating Costs 59 52
Income before Income Tax Expense 47 63

Required:
a. Compute the gross profit percentage for each year. Assuming that the change from 2014 to 2015 is the beginning of a sustained trend, is Insignia likely to earn more or less gross profit from each dollar of sales in 2016?
b. Compute the net profit margin for each year.
Business
1 answer:
Airida [17]2 years ago
6 0

Answer:

Note: <em>See missing wordings in attached picture below</em>

<em />

a. <u>2015</u>

Gross profit percentage = [Total revenue - Cost of crude oil and products] / Total revenue

Gross profit percentage = [$225 - $119] / $225

Gross profit percentage = $106 / $225

Gross profit percentage = 0.47111111

Gross profit percentage = 47.11%

<u>2014</u>

Gross profit percentage = [Total revenue - Cost of crude oil and products] / Total revenue

Gross profit percentage = [$242 - $127] / $242

Gross profit percentage = $115 / $242

Gross profit percentage = 0.475206612

Gross profit percentage = 47.52%

Conclusion: Insignia Corporation are likely to earn less gross profit from each dollar of sales in 2016 because Gross profit percentage decreased from 2014 to 2015.

b. <u>2015</u>

Net profit margin = Net income / Total revenue

Net profit margin = $26/$225

Net profit margin = 0.1155555

Net profit margin = 11.56%

<u />

<u>2014</u>

Net profit margin = Net income / Total revenue

Net profit margin = $37/$242

Net profit margin = 0.152893

Net profit margin = 15.29%

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