Business Financials

Financial Forecast Exercise #2 (20 Points)

Name ________________________________________

Bonanza Companys income for the year ended December 31, 2021, is below:

Bonanza Company
Income Statement				2022 Financial
For Year Ending December 31, 2021				Forecast
Sales		$720,000
Cost of Goods Sold		432,000
Gross Profit		$288,000
Expenses:
Factory Overhead Expense		$176,800
Equipment Lease Expense		41,600
Insurance Expense		16,200
Marketing Expense		6,500
Total Expenses		$241,100
Earnings Before Taxes (EBT)		$46,900
Tax		11,725
Net Income		$35,175

Prepare the companys 2022 financial forecast, based on the following assumptions for 2022 in relation to the final 2021 income statement amounts:

1. Sales will increase 50% due to increased product demand

2. Cost of goods sold are estimated to be 50% of 2022 sales

3. Factory overhead expense is estimated to be 40% of 2022 cost of goods sold

4. Equipment lease expense is estimated to be 20% of 2022 cost of goods sold

5. Insurance expense is expected to remain unchanged in 2022

6. Marketing expense is expected to be 10% of 2022 sales

7. The tax rate will again be 25%