Question

Using the practice on page 7−8, determine the profit margin (aka, net profit margin) if Quality Resort Toys had sales of $1,900,000; sales discounts of $50,000 and cost of goods sold of $800,000 and net income of $277,500. % (do not include % in your answer)

Answer 1

The profit margin for Quality Resort Toys is calculated by dividing the net income of $277,500 by the net sales of $1,850,000, which equals 0.15 or 15%.

Step-by-step explanation:

To calculate the profit margin, also known as the net profit margin, we first need to determine the net sales and then divide the net income by the net sales. Net sales are calculated by subtracting sales discounts from total sales. In this scenario, Quality Resort Toys had total sales of $1,900,000 and sales discounts of $50,000, resulting in net sales of $1,850,000. The net income provided is $277,500. The profit margin is then calculated by dividing the net income by the net sales.

Profit Margin = Net Income / Net Sales

Profit Margin = $277,500 / $1,850,000

Profit Margin = 0.15

Therefore, the profit margin for Quality Resort Toys is 15% (as a decimal, it's 0.15, but you don't need to include the percentage sign as per the question).