A metal fabrication company has annual revenues at $2.5 million. The casts of pr
ID: 2640029 • Letter: A
Question
A metal fabrication company has annual revenues at $2.5 million. The casts of producing the manufactured items, consisting of labor and raw materials, amounts to $850,000. The overhead charge is $150,000; the interest on debt is $75,000 and the tax rate is 35%. What is the moss profit? 1650000.0000 A metal fabrication company has annual revenues of $2.5 million. The costs of producing the manufactured items, consisting of labor and raw materials, amounts to $850,000. The overhead charge is $150,000; the interest on debt is S75,000; and the tax rate is 35%.Explanation / Answer
Solution :
1) Gross profit isthe difference between net sales and cost of goods sold.
Cost of goods sold consists of direct materials , direct labor and overhead costs.
Net sales = $ 2,500,000
cost of goods sold =$ 850,000 + $ 150,000
cost of goods sold = $ 1,000,000
Gross profit = $ 2,500,000 - $ 1,000,000
Gross Profit = $ 1,500,000
2) The Earnings before Interest and taxes is the profit before considering interest expense and tax burden
EBIT = $ 1,500,000