Mann Engineering

Income Statement

March 31, 2017

REVENUES:

Net sales $7,800,000

EXPENSES:

Cost of Product Sold $1,150,000

Salaries of key employees $200,000

Salaries of other employees $230,000

Utilities $100,000

Interest Payments $55,000

Advertising $20,000

Other Expenses $950,000

Total Expenses $ 2,705,000

INCOME BEFORE TAXES $ 5,095,000

LESS TAXES (25%) $ 1,273,750

NET INCOME $ 3,821,250

Mann Engineering is a 3rd party performance car parts manufacturer. Historically sales during the spring months from March to May account for 55% of annual revenue while the remaining 45% of annual revenue spreads out evenly for the rest of the nine months. Assume cost of product sold is proportional to sales volume while all other expenses are evenly distributed across 12 months throughout the year. The company estimated that the maximum probable length of a shutdown is six months. During this time Mann Engineering has to continue to pay its utilities, interest payments, and all of its employees due to the fact that they are all highly trained employees that would be very hard to replace. What is the maximum probable business income loss for Mann Engineering?