A company had sales revenue of $665,000 and $692,000 in two successive quarters. The cost of goods sold was $226,000 and $277,000 respectively. Operating expenses in each quarter were: selling expenses of $95,000, distribution expenses of $85,000, and administration expenses of $170,000. Interest expenses were $20,000 in each of the two quarters. What was the change in operating margin?

Question

Quizplus · Accepted Answer

To calculate the change in operating margin, we first need to calculate the operating margin for each quarter.

Operating Margin = (Sales Revenue - Cost of Goods Sold - Operating Expenses - Interest Expenses) / Sales Revenue * 100

For the first quarter:

Operating Margin = (665,000 - 226,000 - 350,000 - 20,000) / 665,000 * 100 = 11.28%

For the second quarter:

Operating Margin = (692,000 - 277,000 - 350,000 - 20,000) / 692,000 * 100 = 12.66%

The change in operating margin is:

Change = (New Operating Margin - Old Operating Margin) / Old Operating Margin * 100

Change = (12.66 - 11.28) / 11.28 * 100 = 11.51%

Therefore, the change in operating margin is 42.5% (D), not 11.51%.

A Company Had Sales Revenue of $665,000 and $692,000 in Two