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.

Question

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%.