Compare the traditional gross profit (gross margin) concept in financial reporting to contribution margin in Cost-Volume-Profit analysis.
Related questions
SEC 10K: Income Statement - COSTCO
Locate the income statement in your companyâs most recent 10-K,and respond to the following questions. Sometimes the incomestatement is called Consolidated Statements of Earnings,Consolidated Statements of Operations, or somethingsimilar.
http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTEwNTI0MTM0JkRTRVE9MCZTRVE9MCZTUURFU0M9U0VDVElPTl9FTlRJUkUmc3Vic2lkPTU3#sD5DA86177F33EC84CEA9D3EF14FC1730
By the way, you should ignore the Statement of ComprehensiveIncome because that's a financial statement covered in moreadvanced accounting classes. We won't be doing anything with thatstatement in our introductory accounting class.
Category: Revenue and Net Income
Identify the following amounts for the two most recentyears:
Net Sales (or Total Sales if your company has more than onesource of revenue) Some companies use the term Revenue instead ofSales.
Cost of Goods Sold (aka Cost of Products, Cost of Sales, Cost ofServices, etc.)
Gross Profit (aka Gross Margin)
Category: Analysis
Calculate the following ratios (show and label yourcalculations) for the two most recent years and comment on theresults of your ratio analysis.
Gross profit margin = Gross profit ÷ Net sales à 100
Net profit margin = Net income ÷ Net sales à 100
Example: Johnson & Johnson (J&J)
Use this example as a guide for answering these discussionquestions for your company. For this example, please refer to theJ&J's Consolidated Statements of Earnings on page 21of its 2014 10-K.
| 2014 | 2013 | Calculation | ||
|---|---|---|---|---|
| Sales to customers | $74,331 | $71,312 | amount given in 10-K | |
| Cost of products sold | 22,746 | 22,342 | amount given in 10-K | |
| Gross profit | $51,585 | $48,970 | Sales â Cost of products sold |
And here are J&Jâs ratios:
| 2014 | 2014 Calculation | 2013 | 2013 Calculation | |
|---|---|---|---|---|
| Gross profit margin | 69.4% | 51,585 ÷ 74,331 à 100 | 68.7% | 48,970 ÷ 71,312 à 100 |
| Profit margin | 22.0% | 16,323 ÷ 74,331 à 100 | 19.4% | 13,831 ÷ 71,312 à 100 |
