Question

First Benchmark Publishing's gross margin is 50% of sales. the operating costs of the publishing are estimated at 15% of sales. if the company is within the 40% tax bracket, determine the percent of sales in their profit after taxes?

Answer 1

Gross margin = 50% of sales

Operating cost = 15% of sales

Calculate the net margin -

Net margin = Gross margin - Operating cost = 50% of sales - 15% of sales = 35% of sales

Tax rate = 40%

Tax = Net margin * Tax rate = 35% of sales * 40% = 14% of sales

Calculate Net margin after tax -

Net margin after tax = Net margin - Tax = 35% of sales - 14% of sales = 21% of sales

Net margin after tax implies profit after taxes.

Thus,

21 percent of sales in their profit after taxes.