1. Calculate the Gross Margin for year X

2. Calculate Operating Margin for year X

3.Use the solver to calculate what Cost of Sales has to be to hit a 31% Gross Margin

4) Management want to reduce S&GA. How much do they have to save to hit a 15% Operating Margin.

Vomisuluu tu mUUMTU ULU LUTHIETIL Net Sales Cost of Sales Gross Profit Year X 765,000 535,000 230,000 Year X-1 725,000 517,000 208,000 Operating Expenses Depreciation and Amortization Selling, General and Admin Expenses Operating Income 28,000 100,929 101,071 25,000 109,500 73,500 Other Income (Expense) Dividend and Interest Income Interest Expense Foreign Currency gain (loss) Income Before Taxes and Extraordinary Loss 5,250 (12,125) 2,000 96,196 9,500 (16,250) (1,000) 65,750 26,250 39,500 Income Taxes Income Before Extraordinary Loss Extraordinary Loss Net Income 41,446 54,750 (5,000) 49,750 39,500 Serendipity Manufacturing Co, Inc Consolidated Balance Sheet ASSETS Current Assets Cash Marketable Securities Accounts Receivable Inventories Prepaid Expenses Total Current Assets 20,000 40,000 156,000 180,000 4.000 400,000 15.000 32,000 145,000 185,000 3,000 380,000 Property, Plant & Equipment Land Buildings Machinery Leasehold Improvements Furniture, Fixtures, etc. Total Property Plant and Equipment Less: Accumulated Depreciation Net Property.Iplant and Equipment 30,000 125,000 200,000 15,000 15,000 385,000 125,000 260,000 30,000 118,500 171,100 15,000 12,000 346,600 97,000 249,600 Intangible Assets Less Amortization 2,000 2,000 Total Assets 662,000 631,600 LIABILITIES Current Liabilities Accounts Payable Notes Payable Accrued Expenses Income Taxes Payable Other Current Liabilities Total Current Liabilities 60,000 51,000 30,000 17,000 12,000 170,000 57,000 61,000 36,000 15,000 12,000 181,000 Long Term Liabilities Deferred income Taxes Unsecured Debentures Other Long term Debt Total Long Term Liabilities 16,000 130,000 9,000 130,000 6,000 145,000 146,000 TOTAL LIABILITIES 316,000 326,000 SHAREHOLDERS EQUITY Preferred Stock Common Stock Additional Paid in Capital Retained Earnings Less: Treasury Stock TOTAL SHAREHOLDERS EQUITY 6,000 75,000 20,000 250,000 (5,000) 346,000 6,000 72,500 13,500 218,600 (5,000 305,600 TOTAL LIAB AND SHAREHLDR EQTY 662,000 631,600 Year X Year X-1 - ASSETS Current Assets Cash Marketable Securities Accounts Receivable Inventories Prepaid Expenses Total Current Assets NPUT 20,000 40,000 156,000 180,000 4,000 400,000 15,000 32,000 145,000 185,000 3,000 380,000 in 3 Property, Plant & Equipment Land Buildings Machinery Leasehold Improvements Furniture, Fixtures, etc. Total Property Pland and Equipme Less: Accumulated Depreciation 1 Net Property Plant and Equipment 30,000 125,000 200,000 15,000 15,000 385,000 125,000 260,000 30,000 118,500 171,100 15,000 12,000 346,600 97,000 249,600 m 3 Intangible Assets Less Amortization 2,000 2,000 5 Total Assets 662,000 631,600 50 7 LIABILITIES 3 Nm Current Liabilities Accounts Payable Notes Payable Accrued Expenses Income Taxes Payable Other Current Liabiliites Total Current Liabilities 60,000 51.000 30.000 17,000 12,000 170,000 57,000 61,000 36,000 15,000 12,000 181,000 5 mm 7 Long Term Liabilities Deferred income Taxes Unsecured Debentures Other Long term Debt i Total Long Term Liabilities 16,000 130,000 9,000 130,000 6,000 145,000 146,000 3 TOTAL LIABILITIES 316,000 326,000 5 SHAREHOLDERS EQUITY US 7 Preferred Stock 3 Common Stock Additional Paid in Capital Retained Earnings i Less: Treasury Stock 2 TOTAL SHAREHOLDERS EQUITY 6,000 75,000 20,000 250,000 (5,000) 346,000 6,000 72,500 13,500 218,600 (5,000 305,600 4 TOTAL LIAB AND SHAREHLDR EQT 662,000 631,600 Consolidated Statement of Cash Flows Year X 49,750 Cash Flow from Operating Activites Net Income Adjustments Depreciation and Amortization Change in Marketable Securities Change in Accounts Receivables Change in Inventory Change in Prepaid Expenses Change in Deferred Taxes Change in Accounts Payable Change in Accrued Expenses Change in Taxes Payable Total Adjustments 28,000 (8,000) (11,000) 5,000 (1,000) 7,000 3,000 (6,000) 2,000 19,000 Net Cash Provided by Operations 68,750 Cash Flow from Investing Activites Purchase of Fixed Assets Net Cash Used for investing Activites. (38,400) (38,400) Cash Flow from Financing Activities Change in Notes Payable Change in Long Term Debt Proceeds from Issuance of Comn Payment of Dividends Net Cash from Financing Activities (10,000) (6,000) 9,000 (18,350) omn (25,350) Increase in Cash Cash at Beginning of Year Cash at End of Year 5,000 15,000 20,000