Flingers Inc Upper Management Plans to Cut Cost of Goods Sold by for FY

question 11

Multiple Choice

Flingers Inc. reveals the following information in their annual report for FY 2017 $$\begin{array}{l}\text { Earnings and Expenses }\\\begin{array} { | l | c | } \hline \text { Sales } & \$ 10,000,000 \\\hline \text { Cost of goods sold } & \$ 5,000,000 \\\hline \text { Pretaxearnings } & \$ 500,000 \\\hline & \\\hline \text { Selected Balance Sheet Items } & \\\hline \text { Merchandise inventory } & \$ 80,000 \\\hline \text { Total assets } & \$ 2,000,000 \\\hline\end{array}\end{array}$$ Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales. What will Flingers' profit margin be for 2018

• A)5%
• B)7.5%
• C)9%
• D)11%

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Definitions:

Straight-Line Method

A depreciation technique that allocates an equal amount of an asset's cost to each year of its useful life.

Commercial Substance

A term used in accounting to indicate that a transaction has caused a change in the economic circumstances of a business.

Future Cash Flows

Estimated amounts of money expected to be received or paid out in the future due to current or planned operations or investments.

Minerals

Naturally occurring solid substances with a defined chemical composition and crystal structure, used extensively in various industries.