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22 October, 22:30

A company has the following balances: Sales revenue $312,000: Sales Returns and Allowances $2,000: Sales Discounts $4,000: Cost of Goods Sold $184,000: Operating Expenses $84,000. Assume there are no other revenues, other expenses, or income tax expense. How much is the profit margin?

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  1. 23 October, 00:53
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    The profit margin is 12.4%

    Explanation:

    Profit margin is used to measure the amount of profit. It is the amount by which the money gotten from sells exceed the cost in a business. It is the ratio of net income to net sales

    Net sales = Sales revenue - (sales discounts + sales returns and allowances)

    Net sales = $312000 - ($4000 + $2000) = $312000 - $6000 = $306000

    Net income = Net sales - cost of goods sold - operating expenses

    Net income = $306000 - $184000 - $84000 = $38000

    Profit margin = Net income / net sales

    Profit margin = $38000/$306000 = 0.124 = 12.4%.
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