Question

2. Valentine Productions, is a production company plan and produces lighting, staging, music, and subcontracts other area of a full event experience. With over 15 full time staff, their payroll is their biggest cost. The average payroll for each employee is $35,000 per year. Last year they hit it out of the park, and their annual sales were at $5,500,000. Before they could all celebrate the CEO Tim wanted to see their overall gross and net profit margins. Besides their staff, they purchased $100,000 in electrical cords, $50,000 in gaffers tape, and $75,00 in staging & trusses. After all those costs Valentine had other expenses of $50,000 in gas, $100,000 in insurances and permits, $25,000 in advertising, and $80,000 in utilities. What is their Gross & Net Profit? Answer:

Answer 1

Sales		$       5,500,000
Less: Direct costs
Direct labor costs (15*35000)	$            525,000
Electrical cards	$            100,000
Gaffers tape	$              50,000
Staging and trusses (This amount is corrected to $75,000.)	$              75,000
Total direct costs		$          750,000
Gross margin		$       4,750,000
Less: Other opearting expenses
Gas	$              50,000
Insurances and permits	$            100,000
Advertising	$              25,000
Utilities	$              80,000
Total other opearting expenses		$          255,000
Net income		$       4,495,000

	Gross margin		$       4,750,000
Divided by:	Sales		$       5,500,000
	Gross margin ratio		86.36%
	Net income		$       4,495,000
Divided by:	Sales		$       5,500,000
	Net margin ratio		81.73%