I can not figure out B and C. I have tried doing B and multiplying the Sales Revenue by 68% for the Costs of goods sold but it is saying its incorrect. Please help me with B and C.
Problem 7-20A Preparing pro forma income statements with different assumptions LO 7-6 officers of Benson 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 Cost of goods sold Gross profit Selling & administrative expenses Net income $2,300,0e0 1,610,0a0 690,000 384,000 $ 386,000 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 $74,000. 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 2 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 escolate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $347000 With the increosed 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? Required A Required B Required C Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? (Round "percentage increase" to 2 decimal places. (i.e., .2345 should be entered as 23.45) BENSON COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Percentage increase S 2,589,500 1,812,650 776,850 332,950 S 443,900 12.591 % Required B> 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 2 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 lessA BENSON COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Reduction in selling & administrative expenses S 2,300,000 2,300,000 S 2,300,000 K Required A Required C > Required A Required 8 Required C The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $347,000. 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 lessa BENSON COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Will the company be able to reach its goal? Required B
