Chapter 2: 10BP (page 115)
Delsing Plumbing Company has beginning inventory of 16,500 units, will sell 55,000 units for the month, and desires to reduce ending inventory to 25 percent of beginning inventory. How many units should Delsing produce?
The number of units that should be produced by the company is 42,625.
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a. Swank Clothiers had sales of \(383,000 and cost of goods sold of \)260,000. What is the gross profit margin (ratio of gross profit to sales)?
b. If the average firm in the clothing industry had a gross profit of 25 percent,
how is the firm doing?
Perez Corporation has the following financial data for the years 20X1 and 20X2:
20X1 | 20X2 | |
Sales | \(8,000,000 | \)10,000,000 |
Cost of goods sold | 6,000,000 | 9,000,000 |
Inventory | 800,000 | 1,000,000 |
b. Compute inventory turnover based on an alternative calculation that is used by many financial analysts, Cost of goods sold/Inventory, for each year.
Baker Oats had an asset turnover of 1.6 times per year.
a. If the return on total assets (investment) was 11.2 percent, what was Baker’sprofit margin?
Dr. Zhivàgo Diagnostics Corp.’s income statement for 20X1 is as follows
| Sales | \( 2790000 |
| Cost of goods sold | 1790000 |
| Gross profits | \) 1000000 |
| Selling and administrative expenses | 302000 |
| Operating profits | \( 698000 |
| Interest Expense | 54800 |
| Income before tax | \) 643200 |
| Taxes 30% | 192960 |
| Income after tax | $ 450240 |
b. Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2?
Precision Systems had sales of \(820,000, cost of goods of \)510,000, selling and administrative expense of \(60,000, and operating profit of \)103,000. What was the value of depreciation expense? Set this problem up as a partial income statement and determine depreciation expense as the “plug” figure required to obtain the operating profit.
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