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Family Home and Security, Inc. sells super padlocks. It reported an increase in net sales from...

Question:

Family Home and Security, Inc. sells super padlocks. It reported an increase in net sales from {eq}5.0 {/eq} billion in 2014 to {eq}5.3 {/eq} billion in 2015, and an increase in gross profit from {eq}1.5 {/eq} billion in 2014 to {eq}1.7 {/eq} billion in 2015. Calculate each year's gross profit percentage: 2015 and 2014.

Gross Profit Margin:

Gross profit margin is the percentage representation of gross profit in relation to the sales for the period. It measures the company's' operating performance in terms of operating profitability.

Answer and Explanation:


Gross profit percentage:


Gross profit percentage = gross profit / net sales

For the year 2014:

Net sales = $5.0 billion

Gross profit = $1.5 billion

Gross profit percentage = $1.5 billion / $5.0 billion = 30%


For the year 2015:

Net sales = $5.3 billion

Gross profit = $1.7 billion

Gross profit percentage = $1.7 billion / $5.3 billion = 32.08%


Learn more about this topic:

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How to Calculate Gross Profit Margin: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 17
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