They would like the operating income to be around $1,500,000 to consider making a fulltime switch. They have many questions that need to be answered.

JRS Inc. sells whatever it makes. There is no work in process or finished goods inventory. Shiva has collected some data relating to the most recent year. They incurred manufacturing costs of $3,240,000 during the recent year which includes $1,200,000 for materials, $800,000 for labor and $1,240,000 for other manufacturing costs (depreciation, factory rent and miscellaneous). The materials and the labor can be traced to each purse. The other manufacturing costs increase with the volume of purses but not in an exact proportion. JRS Inc. pays their sales staff commissions of 10% on the sales price. Their other general administrative expenses are $960,000 a year. JRS Inc. manufactured and sold 12,000 leather purses at a selling price of $500 per purse during the recent year. Shiva is considering expanding their product line by adding leather briefcases to their product line. The marketing consultant that Shiva hired concluded that there is demand for their leather purses and leather briefcases.

1. What is the current operating income? Prepare an income statement for the company in a simplified functional format.

2. If you want to make a disposable (after tax) income of $140,000 after paying taxes at 30%. How much gross salary do you need to earn?

\begin{tabular}{|l|l|} \hline Income Statement Format & \\ \hline Sales & Amounts \\ \hline Less: Cost of goods sold & \\ \hline Gross margin & \\ \hline Less: Selling, general \& administrative expenses & \\ \hline Operating Income & \\ \hline \end{tabular}