Question

Fill in the missing amounts.

		Wildhorse Company		Sandhill Company
Sales revenue		$85,000		$
Sales returns and allowances				4,000
Net sales		79,000		146,000
Cost of goods sold		45,030
Gross profit				77,380
Operating expenses		22,515
Net income				20,440

Calculate the profit margin and the gross profit rate for each company. (Round answers to 1 decimal place, e.g. 15.5%.)

		Wildhorse Company			Sandhill Company
Profit margin			%			%
Gross profit rate			%			%

Answer 1

Requirement 1:Fill in the missing figure	Equation	Wildhorse company	Sandhill company
Sales revenue	net sales + sales return and allowances	85,000	150,000
Sales return and allowances	sales revenue - net sales	6,000	4,000
Net sales		79,000	146,000
Cost of goods sold	net sales - gross profit	45,030	68,620
Gross profit	net sales - cost of goods sold	33,970	77,380
operating expenses	Gross profit - net income	22,515	56,940
net income	Gross profit - operating expenses	11,455	20,440
Requirement 2: Profit margin
Profit margin	(Net income/net sales)*100
	(11,455/79,000)*100	14.5%
	(20,440/146,000)*100		14%
Requirement3: Gross profit rate
Gross profit rate	(Cost of goods sold/net sales)*100
	(45,030/79,000)*100	57%
	(68,620/146,000)*100		47%