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Profit as a percent of sales

Wilde Home & Garden is organized into three departments. The following sales and cost data are available for the prior year:
Dept A Dept B Dept C Total
Sales $270,000 $855,000 $910,000 $2,035,000
Less: VC 110,000 520,000 710,000 1,340,000
CM 160,000 335,000 200,000 695,000
Less: FC 70,000 90,000 95,000 255,000
Profit 90,000 245,000 105,000 440,000
a. Calculate profit as a percent of sales in the prior year
b. Suppose sales in the current year increased by 15 percent.Calculate profit as a percent of sales for the new level of sales and explain why the percent is greater than the one calculated in part a.

Solution Preview

a. Profit as a percentage of sales = Profit/Sales
Profit as a percentage of sales is
Dept A = 90,000/270,000 = 33.3%
Dept B = 245,000/855,000 = 28.7%
Dept C = 105,000/910,000 = 11.5%
Total = ...

Solution Summary

The solution explains how to calculate the profit as a percent of sales

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