Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $79,000. The president has announced that the company's goal is to increase net income by 15 percent Required The following items are independent of each other a. Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? b. The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income. c. The company decides to escalate its advertising campaign to boost consumer recognition, which willl increase selling and administrative expenses to $348,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal? Complete this question by entering your answers in the tabs below. Required A Required B Required C The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income. Show less STUART COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Reduction in selling& administrative expenses Required A Required C Top executive officers of Stuart Company, a merchandising firm, are preparing the next year's budget. The controller has provided everyone with the current year's projected income statement. Current Year Sales revenue $2,400,000 1,680,000 720,000 319,000 Cost of goods sold Gross profit Selling & administrative expenses Net income 401,000 Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $79,000. The president has announced that the company's goal is to increase net income by 15 percent Required The following items are independent of each other. a. Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? b. The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income. c. The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $348,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal? Complete this question by entering your answers in the tabs below. Required C Required B Required A The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $348,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal? Show less STUART COMPANY Pro Forma Income Statement $2,760,000 Sales revenue 1,932,000 Cost of goods sold 828,000 Gross profit 348,000 Selling & administrative expenses $ 480,000 Net income Will the company reach its goal? Required C Required
