oldsheldon

oldsheldon

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University of Glasgow

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Local Co. has sales of $ 10.5 million and cost of sales of $ 6.4 million. Its​ selling, general and administrative expenses are $ 490,000$ and its research and development is $ 1.1 million. It has annual depreciation charges of $ 1.2 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?

d. If Local Co. had an increase in selling expenses of

$320,000​,

how would that affect each of its​ margins?

e. If Local Co.had interest expense of

$830,000​,

how would that affect each of its​ margins?

a. What is​ Local's gross​ margin?

​Local's gross margin is ​%.

​(Round to one decimal​ place.)

b. What is​ Local's operating​ margin?

​Local's operating margin is ​%.

​(Round to one decimal​ place.)

c. What is​ Local's net profit​ margin?

​Local's net profit margin is %.

​(Round to two decimal​ places.)

d. If Local Co. had an increase in selling expenses of $320,000​,

how would that affect each of its​ margins?  ​(Select the best choice​ below.)

A.

Selling expenses do not affect the gross​ margin, but the increase in such expenses will decrease the other margins.

B.

Selling expenses only affect the operating​ margin, but the increase in such expenses will not affect the other margins.

C.

Selling expenses only affect the gross​ margin, but the increase in such expenses will not affect the other margins.

D.

Selling expenses only affect the net profit​ margin, but the increase in such expenses will not affect the other margins.

e. If Local Co.had interest expense of $830,000​,

how would that affect each of its​ margins? ​ (Select the best choice​ below.)

A.

Only the operating margin accounts for interest​ expense, so both the gross and profit margins will be unaffected.

B.

Only the gross margin accounts for interest​ expense, so both the net profit and operating margins will be unaffected.

C.

Both the gross and operating margins will be​ affected, but the net profit margin will be unaffected.

D.

Only the net profit margin accounts for interest​ expense, so both the gross and operating margins will be unaffected.

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