Question

9. Gross Margin equals $50,000, operating expenses equals $23,000, income

taxes equals $5,400 and sales is $110,000. What is the company's net income?

Answer 1

$21600

Explanation:

Net income is calculated by deducting all company expenses from its total revenue. Net income is given by the formula:

Net income = Revenue - cost of goods sold - operating expenses - tax.

But Gross margin = gross profit = Revenue - cost of goods sold. Hence:

Net income = Gross margin - operating expenses - tax.

Substituting gives:

Net income = $50000 - $23000 - $5400

Net income = $21600