Income statement information for Sadie Company is below: Sales
$175,000
Cost of goods sold
115,000
Gross profit
$ 60,000
Using vertical analysis of the income statement for Sadie Company, determine the gross profit margin.
A) 100%
B) 66%
C) 34%
D) 29%

Question

Quizplus · Accepted Answer

To calculate the gross profit margin, divide the gross profit by the sales and multiply by 100 to get the percentage. 
Gross profit margin = (Gross profit / Sales) x 100% 
= ($60,000 / $175,000) x 100% 
= 34.29% 
Rounded to the nearest percent, the gross profit margin is 34%. Therefore, the best choice is C.

Income Statement Information for Sadie Company Is Below: Sales