Question

A firm has sales of $910,375.00, cost of goods of $392,405.00, selling and administrative expense of $96,385.00 and depreciation and amortization expense of $53,180.00.

What is the operating profit margin for the firm?

Answer 1

To calculate the operating profit margin, we first need to determine the operating profit, which is calculated as follows:

1. **Calculate Operating Profit**:
\[
\text{Operating Profit} = \text{Sales} - \text{Cost of Goods Sold} - \text{Selling and Administrative Expenses} - \text{Depreciation and Amortization}
\]

Plugging in the values:
\[
\text{Operating Profit} = 910,375.00 - 392,405.00 - 96,385.00 - 53,180.00
\]

Calculate each step:
- First, subtract Cost of Goods Sold:
\[
910,375.00 - 392,405.00 = 517,970.00
\]
- Next, subtract Selling and Administrative Expenses:
\[
517,970.00 - 96,385.00 = 421,585.00
\]
- Finally, subtract Depreciation and Amortization Expense:
\[
421,585.00 - 53,180.00 = 368,405.00
\]

Thus, the operating profit is:
\[
\text{Operating Profit} = 368,405.00
\]

2. **Calculate Operating Profit Margin**:
\[
\text{Operating Profit Margin} = \left( \frac{\text{Operating Profit}}{\text{Sales}} \right) \times 100
\]

Now plug in the numbers:
\[
\text{Operating Profit Margin} = \left( \frac{368,405.00}{910,375.00} \right) \times 100
\]

Calculating it:
\[
\text{Operating Profit Margin} = 0.4046 \times 100 \approx 40.46\%
\]

Therefore, the operating profit margin for the firm is approximately **40.46%**.