Answer:
Net Income $21,000
Net Sales $140,000
Operating Margin ratio = 14%
Explanation:
Net Income is calculated by subtracting operating expenses from gross income.
Net is is calculated by adjusting contra sales account balance is sales value+
Profit Margin ratio is the ratio of net profit to sales value.
$
Sales Revenue 150,000
Sales Discount (3,000)
Sales returns and allowances (7,000)
Net Sales 140,000
Cost of Goods sold (91,000)
Gross Income 49,000
Operating Expenses (28,000)
Operating / Net Income 21,000
In the absence of interest expenses and tax rate operating income is considered as net income.
Operating Margin = ( $21,000 / $150,000 ) x 100 = 14%
