Daniel Singh, the controller of Meier Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow.

Historically, cost of goods sold is about 60 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue.
Joe Meier, the chief executive officer, told Mr. Singh that he expected sales next year to be 8 percent for each respective quarter above last year€™s level. However, Ashley Odom, the vice president of sales, told Mr. Singh that she believed sales growth would be only 5 percent.

Required
a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Meier€™s estimate.
b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Odom€™s estimate.
c. Explain why two executive officers in the same company could have different estimates of futuregrowth.

Transcribed Image Text:

First Second Third Quarter urter Quarter Quarter Ttal $180,000 $200,000 $210,000 $260,000 $850,000 Fourth Sales revenue Cost of goods sold 108,000 120,000 126,000 156,000 510,000 72,000 80,000 84,000 104,000 340,000 Selling & admin. expenses 26,000 84,000 S 55,000 60,000 63,000 78,000 $256,000 Gross profit 17,000 20,00021,000 Net income