A company has a gross profit margin of 40%, operating expenses of Rs. 300,000, and net sales of Rs. 1,200,000. What is the company’s operating profit margin?20%15%10%25%
Question
A company has a gross profit margin of 40%, operating expenses of Rs. 300,000, and net sales of Rs. 1,200,000. What is the company’s operating profit margin?20%15%10%25%
Solution
To calculate the operating profit margin, we first need to find the gross profit, then subtract the operating expenses, and finally divide by the net sales.
Step 1: Calculate Gross Profit Gross profit margin is 40% of net sales. So, Gross Profit = 40% of Rs. 1,200,000 = Rs. 480,000
Step 2: Calculate Operating Profit Operating Profit = Gross Profit - Operating Expenses = Rs. 480,000 - Rs. 300,000 = Rs. 180,000
Step 3: Calculate Operating Profit Margin Operating Profit Margin = (Operating Profit / Net Sales) * 100 Operating Profit Margin = (Rs. 180,000 / Rs. 1,200,000) * 100 = 15%
So, the company’s operating profit margin is 15%.
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