2.2 Develop a profit-and-loss statement for the Westgate division of North Industries.

This division manufactures light fixtures sold to consumers through home improvement and hardware stores. Cost of goods sold represents 40% of net sales.

Marketing expenses include selling expenses, promotion expenses, and freight.

Selling expenses include sales salaries totaling $3 million per year and sales commissions

(5% of sales). The company spent $3 million on advertising last year, and freight costs were 10% of sales. Other costs include $2 million for managerial salaries and expenses for the marketing function and another $3 million for indirect overhead allocated to the division.

a. Develop the profit-and-loss statement if net sales were $20 million last year.

b. Develop the profit-and-loss statement if net sales were $40 million last year.

c. Calculate Westgate’s break-even sales.