10.11

B- how do you know what the fixed and variable costs are for the business? I know whats costs would be which, but it doesnt state any costs except costs of goods sold.

CHAPTER 10 Forecasting Financial Statements Year 3 Year 4 (S amounts in millions) AK Steel Sales Cost of products sold Gross proft Gross margin $4,042 $3,887 s155 5217 4554 5 663 3.8% 12.7% Nucor Sales Cost of products sold Gross profit Gross margin $6,266 $5,997 269 $11377 9,129 $2,248 4.3% 198% Industry analysts anticipate the following annual changes in sales for the next five years: Year +1, 5% increase; Year +2, 10% increase; Year +3, 20% increase; Year +4, 10% decrease; Year +5, 20% decrease. REQUIRED a. Estimate the variable cost as a percentage of sales for the cost of products sold by diwid ing the amount of the change in the cost of products sold by the amount of the change in sales. Then multiply the variable-cost percentage times sales to estimate the total able cost. Subtract the variable cost from the total cost to estimate the fixed cost for cost of products sold. Follow this procedure to estimate the manufacturing cost strucue (variable cost as a percentage of sales, total variable costs, and total fixed costs) for of products sold for both AK Steel and Nucor in Year 4 var b. Discuss the structure of manufacturing cost (that is, fixed versus variable) for each hii light of the manufacturing process and type of steel produced. compute the projected sales, cost of sales) o c. Using the analysts' forecasts of sales growth rates, compute the projected sales, products sold, gross profit, and gross margin (gross profit as a percentage each firm for Year +1 through Year +5 d. Why do the levels and variability of the gross margin percentages dif for these tio firms for Year +1 through Year +5