Question

METRO TRACk COMPANY Comparative Income Statements For Years Ended December 31, 2017 and 2016

	2017		2016
Sales	$57,534		$42,542
Cost of goods sold	16,870		13,669
Gross profit	40,664		28,873
Operating expenses	24,093		19,241
Operating income	16,571		9,632
Other expenses/revenues:
Interest revenue	240		194
Interest expense	(196	)	(172	)
Total other (expenses)/revenues	(44	)	(22	)
Income before income taxes	16,615		9,610
Income taxes (34%)	5,649		3,267
Net income	$10,966		$ 6,343

METRO TRACK COMPANY Comparative Balance Sheets December 31, 2017 and 2016

	2017		2016
Assets
Cash	$ 908		$ 636
Marketable securities	1,115		497
Accounts receivable	2,466		2,564
Inventory	3,829		3,970
Prepaid expenses	319		283
Total current assets	8,637		7,950
Investments and other assets	1,976		1,480
Property Plant and equipment, net	7,188		6,570
Trademarks and other intangibles	671		690
Total Assets	$18,472		$16,690
Liabilities and Stockholders' Equity
Notes payable	$ 457		$ 1,638
Current maturities of long-term debt	25		37
Accounts payable and accrued expenses	4,647		4,736
Total current liabilities	5,129		6,411
Long-term debt	1,419		2,321
Total liabilities	6,548		8,732
Common stock	318		318
Additional paid-in capital	583		583
Retained earnings	11,023		7,057
Total stockholders' equity	11,924		7,958
Total liabilities and equity	$18,472		$16,690

Shares at 12/31/17	1,000
Market value of shars at 12/31/17	$25
Dividends per share declared and paid 2017	$7.00

The gross margin percentage for 2017 is:

Select one:

A. 29.3 percent.

B. 43.8 percent.

C. 70.7 percent.

D. 65.4 percent.

Answer 1

SOLUTION

Option C is correct i.e Gross margin percentage = 70.7 percent

Gross margin percentage is the ratio which compares the gross margin of the company with the net sales of the company for a particular period. It is calculated as follows-

Gross margin percentage = Gross Margin / Net sales * 100

= $40,664/ $57,534 * 100

= 70.7%