Case Study

There have been significant discussions on climate change recently and the Australian Federal Government is providing financial incentives to businesses that shift to clean energy. Your company, Battery for Life Ltd$,$ is conducting a feasibility study on whether to manufacture electric vehicle batteries $($EVBs$).$ The data relating to the product are provided below and you are required to use your accounting and statistics knowledge to evaluate if the company should manufacture EVBs or not.

In this case study, you are required to use accounting and statistical analyses to make a business decision on whether or not a product should be manufactured. It is highly recommended you use Microsoft Excel to complete all the required calculations.

QUESTION $1$

Electric Vehicle Battery $($EVB$)$

Use the data below to answer the questions:

The projected total sales for the EVB for the year ended $30$ June $2022$ are $$9,000,000$ and the projected total costs and operating expenses are as follows:

Table $1$B

Item Amount $($$$)$

Cost of goods sold $1,300,000$

Sales Salaries expense $450,000$

Office Salaries expense $500,000$

Advertising expense $350,000$

Office supplies expense $328,000$

Rent expense $940,000$

Insurance expense $230,000$

Utility expense $290,000$

Depreciation expense $282,000$

Interest expense $280,000$

Interest revenue $90,000$

Tax expense $350,000$

Round your final answers to two decimal places.

$1.$ What is the gross profit amount?

$2.$ What are the total operating expenses?

$3.$ What is the profit before interest and tax $($EBIT$)?$

$4.$ What is the net profit?

$5.$ Calculate the Gross Profit ratio, in percentage terms, for EVB in $2022.$

$6.$ Calculate the Net Profit ratio, in percentage terms, for EVB in $2022.$