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Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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Question

The following information was taken from Division Manufacturing’s December 31st trial balances for this year and the previous year.

	This Year	Previous Year
Accounts receivable	$14,000	$17,000
Accounts payable	22,000	15,000
Cost of goods sold	158,000	124,000
Sales	250,000	239,000
Sales returns	17,000	10,000
Retained earnings	32,000	16,000
Dividends declared and paid	3,000	2,000
Operating income	21,500	18,000
Net income	19,000	18,000

Required:

1. Calculate the gross profit margin and operating margin percentage for this year. Round your answers to two decimal places. Use rounded answers in subsequent computations.

	This Year
Gross profit margin percentage	fill in the blank 1 %
Operating margin percentage	fill in the blank 2 %

2. Assuming that all of the operating expenses are fixed (or, won’t change as sales increase or decrease), what will be the operating margin percentage if net sales increase by 30%? Round your answer to two decimal places.

Operating margin percentage

fill in the blank 3 %

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