What is the cost of sales for a firm with a gross profit margin of 30 percent, a net profit margin of 4 percent, and earnings after taxes of $20,000?
A) $200,000
B) $350,000
C) $150,000
D) $125,000

Question

Quizplus · Accepted Answer

The net profit margin is the ratio of net profits (earnings after taxes) to revenues. Given a net profit margin of 4% and earnings after taxes of $20,000, we can calculate the revenues as follows: $20,000 / 0.04 = $500,000. With a gross profit margin of 30%, the cost of sales can be calculated as 100% - 30% = 70% of revenues. Therefore, the cost of sales is 70% of $500,000, which equals $350,000.

What Is the Cost of Sales for a Firm with a Gross