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Chapter 2: 1BP (page 78)

Low Carb Diet Supplement Inc. has two divisions. Division A has a profit of\(156,000 on sales of \)2,010,000. Division B is able to make only \(28,800 onsales of \)329,000. Based on the profit margins (returns on sales), which divisionis superior?

Short Answer

Expert verified

The profit margin of division A is 7.76%, and division B is 8.75%. Based on this, Division B of the company is superior.

Step by step solution

01

Profit margin of division A:

02

Profit margin of division B:

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Most popular questions from this chapter

Explain how depreciation generates actual cash flows for the company.

Arrange the following items in proper balance sheet presentation:

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Retained earnings

187,000

Cash

14,000

Bonds payable

136,000

Accounts receivable

54,000

Plant and equipment 鈥� original cost

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Accounts payable

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Allowance for bad debts

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Common stock, \)1 par, 100,000 share outstanding

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Inventory

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Preferred stock, $59 par, 1,000 share outstanding

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Marketable securities

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Capital paid in excess of par (common stock)

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Frantic Fast Foods had earnings after taxes of $420,000 in 20X1 with 309,000 shares outstanding. On January 1, 20X2, the firm issued 20,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 30 percent.

a. Compute earnings per share for the year 20X1.

b. Compute earnings per share for the year 20X2.

Question:The Haines Corp. shows the following financial data for 20X1 and 20X2:

20X1

20X2

Sales

\(3,230,000

\)3,370,000

Cost of goods sold

2,130,000

2,850,000

Gross profits

\(1,100,000

\)520,000

Selling and administrative expenses

298,000

227,000

Operating profits

\(802,000

\)293,000

Interest expense

47,200

51,600

Income before taxes

\(754,800

\)241,400

Taxes (35%)

264,180

84,490

Income after tax

\(490,620

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For each year, compute the following and indicate whether it is increasing or

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Depreciation expenses

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Interest expenses

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Cost of goods sold

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Taxes

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