Local Co. has sales of $ 10.2 million and cost of sales of $ 5.7 million. Its selling, general and administrative expenses are $ 550 comma 000 and its research and development is $ 1.2 million. It has annual depreciation charges of $ 1.1 million and a tax rate of 35 %. a. What is Local's gross margin? b. What is Local's operating margin? c. What is Local's net profit margin? a. What is Local's gross margin? Local's gross margin is nothing%. (Round to one decimal place.) b. What is Local's operating margin? Local's operating margin is nothing%. (Round to one decimal place.) c. What is Local's net profit margin? Local's net profit margin is nothing%. (Round to two decimal places.)

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hyderali230 hyderali230 · Answer 1 · 2020-02-10T06:52:42+01:00

Answer:

a. What is Local's gross margin? (Round to one decimal place.)

0.4412 / 44.12%

b. What is Local's operating margin? (Round to one decimal place.)

0.1618 / 16.18%

c. What is Local's net profit margin? (Round to two decimal places.)

0.1049 / 10.49%

Explanation:

Local Co.

Income Statement for the year ended MM DD, YY

$, million

Sales 10.20

-Cost of sales 5.70

=Gross Income 4.50

-Selling, general and administrative expenses 0.55

-Research and development 1.20

-Annual depreciation charges 1.10

=Operating Income 1.65

-Tax rate of 35 %. 0.58

=Net Income 1.07

(a) Gross Margin = Gross Income / Sales = 4.50 / 10.20 = 0.4412 = 44.12%

(b) Operating Margin = Operating Profit / Sales = 1.65 / 10.20 =0.1618=16.18%

(c) Net Profit Margin = Net Income / Sales = 1.07 / 10.20 = 0.1049 = 10.49%