Dr. Gupta Diagnostics’ income statement for 20XX is as follows:

Sales	$2,910,000
Cost of goods sold	1,950,000
Gross profit	960,000
Selling and administrative expense	363,000
Operating profit	597,000
Interest expense	55,300
Income before taxes	541,700
Taxes (30%)	162,510
Income after taxes	$379,190

a. Compute the profit margin in 20XX. (Round the final answer to 2 decimal places.)

Profit margin %

b. Assume in 20XY sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Once again, assume a tax rate of 30 percent. What are the income after taxes and profit margin in 20XY? (Round the profit margin to 2 decimal places.)

	20XY
Income after taxes	$
Profit margin	%

Answer rating: 100% (QA)

a To compute the profit margin in 20XX you can use the following formula Profit Margin Income after ... View the full answer