Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming

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Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow:
Jacob Long, the controller of Arvada Corporation, is trying to

Historically, cost of goods sold is about 60 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue. Fred Arvada, the chief executive officer, told Mr. Long that he expected sales next year to be 8 percent for each respective quarter above last year's level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 5 percent.
Required
a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate.
b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate.
c. Explain why two executive officers in the same company could have different estimates of future growth.

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Fundamental Managerial Accounting Concepts

ISBN: 978-1259569197

8th edition

Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds

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