Multiple Choice
Which of the following best describes how 'Net Sales' is calculated on an income statement?
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4. Merchandising Operations
Net Sales
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If a company has a profit margin of 6\% and sales of \$1,800,000, what is its net income?
A
\$180,000
B
\$108,000
C
\$1,692,000
D
\$1,800,000
Verified step by step guidance1
Understand the concept of profit margin: Profit margin is the percentage of sales that represents the company's net income. It is calculated as (Net Income / Sales) × 100.
Identify the given values: The profit margin is 6%, and the sales amount is $1,800,000.
Rearrange the profit margin formula to solve for net income: Net Income = (Profit Margin × Sales) / 100.
Substitute the given values into the formula: Net Income = (6 × 1,800,000) / 100.
Perform the multiplication and division to calculate the net income. This will give the final result.
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