Question

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.


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  • CreatedFebruary 07, 2014
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