Question

A company has the following balances: Sales revenue $312,000: Sales Returns and Allowances $2,000: Sales Discounts $4,000: Cost of Goods Sold $184,000: Operating Expenses $84,000. Assume there are no other revenues, other expenses, or income tax expense. How much is the profit margin?

Answer 1

Answer:

The profit margin is 12.42%

Explanation:

Profit margin is the ratio of net profit to net sales. Net profit is the difference between the gross profit and the operating expenses. The gross profit is the difference between the net sales and cost of sales.

Net sales is the total sales less the sales return, discount and allowances.

As such, Net profit is the difference between the sales and all expenses.

Net profit = $312,000 - $2,000 - $4,000 - $184,000 - $84,000

= $38,000

Net sales = $312,000 - $2,000 - $4,000

= $306,000

Profit margin = $38,000/$306,000

= 12.42%

Answer 2

Answer:

The profit margin is 12.4%

Explanation:

Profit margin is used to measure the amount of profit. It is the amount by which the money gotten from sells exceed the cost in a business. It is the ratio of net income to net sales

Net sales = Sales revenue -  (sales discounts + sales returns and allowances )

Net sales = $312000 - ($4000 + $2000) = $312000 - $6000 = $306000

Net income = Net sales - cost of goods sold - operating expenses  

Net income = $306000 - $184000 - $84000 = $38000

Profit margin = Net income / net sales

Profit margin = $38000/$306000 = 0.124 = 12.4%.