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Chapter 2: Q3-1BP (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

Step: Profit margin of division A:

Profitmargin=NetincomeSales=$156,000$2,020,000=7.76%

02

Step: Profit margin of division B:

Profitmargin=NetincomeSales=$28,800$329,000=8.75%

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