Question

Mormino Corporation’s income statement appears below: Income Statement Sales (all on account) $ 1,240,000 Cost of goods sold 730,000 Gross margin 510,000 Operating expenses 450,462 Net operating income 59,538 Interest expense 18,000 Net income before taxes 41,538 Income taxes (35%) 14,538 Net income $ 27,000 The company’s gross margin percentage is closest to___________.

Answer 1

Answer:

The gross margin percentage is 41.12%

Explanation:

The formula to compute the gross margin percentage is as follows:

Gross Margin percentage = (Total Revenue -  Cost of goods Sold {COGS}) / Total Revenue × 100

where

Total Revenue is the Sales as the sales is the amount generated from selling the item and earn revenue which amounts to $1,240,000

COGS (Cost of goods sold) amounts to $730,000

Putting the values above:

Gross Margin Percentage = ($1,240,000 - $730,000) / $1,240,000 × 100

= 510,000 / $1,240,000 × 100

= 0.411 × 100

= 41.12%