The income statement of Dr. Zhivago Diagnostics Corp. for 20X1 is as follows:

Sales	ps	2,790,000
cost of goods sold		1,550,000
Gross profit	ps	1,240,000
Selling and administrative expenses		306,000
operating profit	ps	934,000
Interest expenses		54.400
income before taxes	ps	879,600
Taxes (30%)		263,880
income after taxes	ps	615,720

to. Calculate the profit margin for 20X1. I have 22.06 which is correct

b. Suppose that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The company can keep all other expenses the same. Again, assume a 30 percent tax rate on pre-tax income. What is the after-tax income and profit margin for 20X2?

Answer rating: 100% (QA)

a To calculate the profit margin for 20X1 we divide the net income by the sales Profit Ma... View the full answer