Estimating Profitability

Step 1:   
      Sales revenue: ($2500)(200) = $500,000

Step 2: 
     Cost of goods sold: $300,000

Step 3: 
     Gross margin: $500,000 - $300,000 = $200,000

Step 4: 
     Operating earnings: $200,000 - (.25 * $500,000) = $75,000

Step 5:
     Net income: $75,000 - ($75,000 * .15) = $63,750


Net Profit Margin: ($63,750) / ($500,000) = 12.75%