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SHOWS What is correct or incorrect for the work you have completed so far, it does not indicate completion Return to question Top executive officers
SHOWS What is correct or incorrect for the work you have completed so far, it does not indicate completion Return to question Top executive officers of Thornton Company, a merchandising firm, are preparing the next year's budget. The controller has provided everyone with the current year's projected income statement. 10 points Sales revenue Cost of goods sold Gross profit Selling 6 administrative expenses Net income Current Year $2,000,000 2.400,000 600,000 274.000 $ 326,000 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. 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. The remnany decides to escalate its advertising camnainn in hnostransumer reconnitinn which will increase selling and Return to question Required A Required B Required C ne stagnoved production increase net ince 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. bints Show less $ 2,000,000 1,380,000 2,000,000 THORNTON COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Reduction in selling & administrative expenses expenses 620,000S $ $ 245, 100% 374,900 245,100 Required A Required c >
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