Question

1. What is the profit margin and profit markup for Ms. Johnson?
2. Are there any expenses that she can eliminate so that her income could be higher and her expenses lower? If so, which expenses can she eliminate and how can she eliminate them? Use examples from the income statement.
3. Ms. Johnson has hired you as a consultant to help her increase her revenue. What questions would you ask her based on the income statement and business summary that she has provided? What recommendations would you make and why?
4. Suppose you know Mr. Bonilla, another attorney, whose profit margin is 20 percent. Would you be able to say who is more profitable, Ms. Johnson or Mr. Bonilla? Why or Why not? Please give examples.

5. MARILYN JOHNSON ATTORNEY AT LAW
   INCOME STATEMENT
   FOR MONTH ENDING JANUARY 31, 2020
   Revenue				$50,000
   	Legal Fees Earned
   Expenses
   	Salary
   		Attorney	5,000
   		Accountant	5,000
   		Paralegal	2,000
   		Administrative Assistant	1,500
   	Rent		3,000
   	Utilities		5,000
   	Telephone and Internet		2,000
   	Malpractice Insurance		3,500
   	Health Benefits (4 People)		5,500
   	Total Expenses			33,000
   Net Income				17,000

Answer 1

sol:

The gross profit margin is 34% and profit markup is 51%

· Gross profit margin = (Revenue-expenses)/revenue

=(50000-33000)/50000

= 0.34 or 34%

· Profit markup = Net income/expenses

=17000/33000

=0.51 or 51%

· She can increase her income by lowering her expense on rent, utilities, telephone and internet. These three components account for nearly 30% of the total expenses. It will be difficult to lower other expenses on account of salary, insurance and health benefits.

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