Question
You are presented with the following information and business strategy proposal about a company. You will be required to create a single-step income statement based
You are presented with the following information and business strategy proposal about a company. You will be required to create a single-step income statement based on the proposal, write a recommendation on the proposal in the form of a memo, and describe any concerns you have related to the proposal. You should use excel to create you income statement and word to write your memo.
The income statement for the current year is:
The senior sales executive has proposed that the company can increase sales by offering sales promotions. The sales promotions would be in the form of coupons, rebates, and FOB shipping. The proposal estimates that sales will increase by 18%, this increase will also increase the ratio of cost of goods sold to sales to 62%. The sales promotions associated selling expenses will increase from $135,0000 to $160,000.
Current shipping is FOB destination, costing $28,000. Other expenses are expected to remain the same with the exception of store supplies, miscellaneous selling, office supplies and miscellaneous administrative expenses, these are expected to increase proportionately with the increased sales.
The preceding items which are included within current year selling expenses and administrative expenses are as follows from October 31, 20Y6:
Store supplies expense $17,000
Office supplies expense $5,000
Miscellaneous selling expense $4,000
Miscellaneous administrative expense $3,000
Income Statement For the Year Ended October 31, 20Y6 Revenues: Sales Interest revenue Total revenues. $1,200,000 $1,215,00015,000 Expenses: Cost of goods sold $800,000 Selling expenses. 135,000 Administrative expenses. 75,000 Interest expense. 21,650 Total expenses. $183,350(1,031,650) Net incomeStep by Step Solution
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