Celestial Navigation is a store for people who collect nautical items and use them to decorate their homes.Last year its net sales totalled $120,500.The value of the items it sold was $72,300.Taxes for the year ran $7,680.The only expenses that the operation has are (1)licenses for $300,(2)salaries to the owner and one part-time assistant for $27,000,(3)administrative expenses of $500,and (4)utilities at $1,200.Calculate the net profit margin for Celestial Navigation.
A) 9.6 percent
B) 23.9 percent
C) 40 percent
D) 60.2 percent
E) Cannot be determined from the information provided

Question

Quizplus · Accepted Answer

Expenses = $300 + $27,000 + $500 + $1,200 = $29,000 Gross margin = Net sales - Cost of goods sold = $120,500 - $72,300 = $48,200. Net profit before tax = Gross margin - Expenses = $48,200 - $29,000 = $19,200. Net profit after taxes = Net profit before taxes - Taxes = $19,200 - $7,680 = $11,520. Net profit margin = Net profit after tax/Net sales = $11,520/$120,500 = .0956 or 9.6%

Celestial Navigation Is a Store for People Who Collect Nautical