Highjinks Corporation’s sales department has estimated revenue of £2,250,000 for your division. 60% of this will be achieved in the first half year and 40% in the remaining half year. Variable operating costs are typically 40% of revenue and fixed operating costs are expected to be £35,000 per month for the first six months and £40,000 per month thereafter.

The selling expense recharged from the sales department is £15,000 per month for the first half year, thereafter £12,000. Salaries are £25,000 per month, depreciation is £5,000 per month and rates £8,000 per month. Light, heat and power are expected to cost £3,000 per month for the first half year, falling to £2,000 thereafter.

• Construct a budget for the year based on the above figures.

• Whatcan you say about the rate of gross profit?